Vehicle production number:

Model 3	72,531
Model s/x	14,517
Total	87,048

Part A: Using the previously provided information calculate the per-unit overhead cost for Q2 2019 for Model 3 and Model S based on allocating manufacturing overhead in a normal costing system using machine hours as a single cost driver for manufacturing overhead.

Part B: Select what you believe is the best cost driver for each of the separate overhead costs listed above if Tesla were to use an activity-based costing system. Prepare a schedule that shows the cost driver that should be paired with each overhead cost. You can use a particular cost driver more than once if you believe it is the best cost driver for more than one overhead cost.

Part C: Using the cost drivers you selected for an activity-based costing system in part B above, calculate the per-unit overhead cost for Q2 2019 for Model 3 and Model S based on allocating overhead in a normal costing system using an activity-based costing approach.

Part D: Assume that actual overhead for Q2 2019 is $800,000,000. Adjust your calculations under both Parts A and C to reflect the needed adjustment to actual overhead costs. Hint: the adjustment should be made based on the total allocated overhead to each model before adjustment.

Part E: Provide a brief description and analysis of the differences in the overhead costs per unit that you calculated in Parts A and C above (use the amounts after making the required adjustment in part D). This description and analysis should note the amount and direction of any differences in overhead costs across the two methods for each model and should be focused on the specific reasons for the majority of the difference between these two overhead allocation methods.

Part F: Name at least two business decisions that Tesla may make differently if they use an activity-based costing system rather than a single volume-based cost driver to allocate manufacturing overhead. Be sure to describe why these business decisions are likely to change with an activity-based costing system. 

Transcribed Image Text:

Let's assume Tesla has estimated their total manufacturing overhead costs for the year to be $2,665,000,000 based on the following schedule of expected overhead costs: Estimated Annual Overhead Costs (all numbers in 000's) Depreciation - Tooling (used to make parts) Depreciation Machinery Shipping Costs (for parts used in making both cars) Materials Handling Costs Utilities (Electricity, water, etc.) Depreciation (Fremont Factory) Supervisor Salaries Set-up Costs Engineering Support Quality Inspections Estimated Total Annual Overhead Let's also assume that Tesla tracks the following information for each model type that could be used as cost drivers. T Microsoft Search (Alt+Q) Possible Cost Driver Information Amount for Model 3 in Q2 2019 Just start typing here to bring features to your fingertips and get help. (?) Tell me more Number of units Direct labor hours Number of machine hours Factory square footage* Number of setups Number of inspections Number of unique parts per vehicle* Number of shipments Number of engineering support calls Number of parts Number of engineering support hours Number of unique machines used* 72,531 1,589,000 789,321 6,000,000 145,062 6,236,754 8,000 1,800 61,870 580,248,000 185,610 200 Amount for Model St in Q2 2019 9,541 437,529 124,561 3,500,000 57,185 1,689,533 9,000 950 19,200 85,869,000 86,400 $220,000 740,000 260,000 140,000 75,000 90,000 500,000 180,000 215,000 245,000 $2,665,000 185 Estimated Total Annual Amount 330,000 8,100,000 2,855,000 9,000,000 810,000 31,750,000 8,500 11,000 325,000 2,665,500,000 1,090,000 250 Iodel 3 and the Model S. Let's assume Tesla has estimated their total manufacturing overhead costs for the year to be $2,665,000,000 based on the following schedule of expected overhead costs: Estimated Annual Overhead Costs (all numbers in 000's) Depreciation - Tooling (used to make parts) Depreciation Machinery Shipping Costs (for parts used in making both cars) Materials Handling Costs Utilities (Electricity, water, etc.) Depreciation (Fremont Factory) Supervisor Salaries Set-up Costs Engineering Support Quality Inspections Estimated Total Annual Overhead Let's also assume that Tesla tracks the following information for each model type that could be used as cost drivers. T Microsoft Search (Alt+Q) Possible Cost Driver Information Amount for Model 3 in Q2 2019 Just start typing here to bring features to your fingertips and get help. (?) Tell me more Number of units Direct labor hours Number of machine hours Factory square footage* Number of setups Number of inspections Number of unique parts per vehicle* Number of shipments Number of engineering support calls Number of parts Number of engineering support hours Number of unique machines used* 72,531 1,589,000 789,321 6,000,000 145,062 6,236,754 8,000 1,800 61,870 580,248,000 185,610 200 Amount for Model St in Q2 2019 9,541 437,529 124,561 3,500,000 57,185 1,689,533 9,000 950 19,200 85,869,000 86,400 $220,000 740,000 260,000 140,000 75,000 90,000 500,000 180,000 215,000 245,000 $2,665,000 185 Estimated Total Annual Amount 330,000 8,100,000 2,855,000 9,000,000 810,000 31,750,000 8,500 11,000 325,000 2,665,500,000 1,090,000 250 Iodel 3 and the Model S.

Answer rating: 100% (QA)

Part A Using the previously provided information calculate the perunit overhead cost for Q2 2019 for Model 3 and Model S based on allocating manufacturing overhead in a normal costing system using mac... View the full answer