QUESTION 3The Fleming Company of Anguilla (FCA) designs and produces automotive parts. In 2019, actualvariable manufacturing overhead is $280,000. FCA's simple costing system allocates variablemanufacturing overhead to its three customers based on machine-hours and prices its contractsbased on full costs. One of its customers has regularly complained of being chargednoncompetitive prices, so FCA's controller Matthias Hodge realizes that it is time to examine theconsumption of overhead resources more closely. He knows that there are three main departmentsthat consume overhead resources: design, production, and engineering. Interviews with thedepartment personnel and examination of time records yield the following detailed infomation:Usage of Cost of Drivers by CustomerContractManufacturingGumbsConnorRichardsonOverhead in 2019MotorsMotorsAutoDepartmentDesignCost DriverCAD design hours$ 35,000150250100Engineering hours25,000220,000$280,000Production1301002703003,7001,000EngineeringTotalMachine hoursRequiredi.Compute the manufacturing overhead allocated to each customer in 2019 using thesimple costing system that uses machine-hours as the allocation base.i. Compute the manufactring overhead allocated to each customer in 2019 usingdepartment-based manufacturing overhead rates.Using your results from requirements 1 and 2 above, which customer do you think wascomplaining about being overcharged in the simple system? Which customer(s) will beunhappy? How would you respond to these concems if raised by those customers?111.iv. How else might FCA use the information available from its department-by-departmentanalysis of mamufacturing overhead costs?FCA's managers are wondering if they should further refine the department-by-department costing system into an ABC system by identifying different activities withineach department. Discuss the two (2) advantages and two (2) disadvantages of an ABCsystem, if it is to be implemented in this context?V.

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Required i. Compute the manufacturing overhead allocated to each customer in 2019 using the simple costing system that uses machine-hours as the allocation base. Compute the manufacturing overhead allocated to each customer in 2019 using department-based manufacturing overhead rates. i.

Required i. Compute the manufacturing overhead allocated to each customer in 2019 using the simple costing system that uses machine-hours as the allocation base. Compute the manufacturing overhead allocated to each customer in 2019 using department-based manufacturing overhead rates. i.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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