Parts World (PW) designs and produces automotive parts. In 2017, actual manufacturing overhead is $316,000. PW's simple costing system allocates manufacturing overhead to its three customers based on machine-hours and prices its contracts based on full costs. One of its customers hasregularly complained of being charged noncompetitive prices, so PW's controller Duncan Johnson realizes that it is time to examine the consumption of overhead resources more closely. He knows that there are three main departments that consume overhead resources: design, production, andengineering. Interviews with the department personnel and examination of time records yield the following detailed information:(Click the icon to view the information.)Read the requirements.Requirement 1. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base.Determine the formula needed to calculate overhead using the simple costing method and then calculate PW's manufacturing overhead rate for 2017. (Round your answer to the nearest cent.)Data tableDepartmentDesignUsage of Cost Drivers by CustomerManufacturingUnitedOverhead in 2017 MotorsFegitiCAD-design-hours $45,00035,000236,000$316,000Cost DriverEngineering Engineering-hoursProduction Machine-hoursTotal=150130Manufacturing overhead rate300ContractCaufield HermanMotors250per machine hour1002,700Auto1002701,000CXRequirements1.2.3.4.5.Compute the manufacturing overhead allocated to each customer in 2017using the simple costing system that uses machine-hours as the allocationbase.Compute the manufacturing overhead allocated to each customer in 2017using department-based manufacturing overhead rates.Comment on your answers in requirements 1 and 2. Which customer do youthink was complaining about being overcharged in the simple system? If thenew department-based rates are used to price contracts, which customer(s)will be unhappy? How would you respond to these concerns?How else might PW use the information available fromits department-by-department analysis of manufacturing overhead costs?PW's managers are wondering if they should further refinethe department-by-department costing system into an ABC system byidentifying different activities within each department. Under what conditionswould it not be worthwhile to further refine the department costing systeminto an ABC system?X

Name: Parts World (PW) designs and produces automotive parts. In 2017, actu
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: Parts World (PW) designs and produces automotive parts. In 2017, actual manufacturing overhead is $316,000. PW's simple costing system allocates manufacturing overhead to its three customers based on machine-hours and prices its contracts based on f