Calculate the overhead allocated to each customer using the simple costing method. (Round your answers to the nearest whole dollar. **Roadster Company (RC): Overhead Allocation Analysis for 2020****Introduction:**Roadster Company (RC) specializes in designing and manufacturing automotive parts. In the year 2020, the company's actual variable manufacturing overhead amounted to $280,000. RC employs a simple costing system that allocates variable manufacturing overhead to its three clients based on machine-hours. Contracts are priced on full cost basis. A periodic review, prompted by customer feedback regarding pricing competitiveness, revealed a need for closer examination of overhead resource consumption across three main departments: design, production, and engineering. Detailed data collection with the help of department personnel and time records has provided the following insights:**Requirement 1: Overhead Allocation Computation***Objective:* Compute the manufacturing overhead allocated to each customer for the year 2020 using the simple costing system with machine-hours as the allocation base.### Step-by-Step Calculation:**1. Determine the Overhead Rate:**The formula to calculate the overhead rate is:\[ \text{Manufacturing Overhead Rate} = \frac{\text{Total Manufacturing Overhead}}{\text{Total Machine Hours}} \]Using the given data:- Total Manufacturing Overhead: $ \$280,000 $- Total Machine Hours: $ 5,000 $\[ \text{Manufacturing Overhead Rate} = \frac{280,000}{5,000} = \$56.00 \text{ per machine hour} \]**2. Calculate Overhead Allocation for Each Customer:**Using the calculated overhead rate, the next step is to allocate overhead to each customer based on the machine-hours they used.| **Customer** | **Machine Hours Used** | **Overhead Allocated** ||---------------------|------------------------|-------------------------------|| Southern Motors | | || Caesar Motors | | || Juniper Auto | | |*[Note: The specific machine hours used by each customer need to be filled in to complete the allocation.]**[Round off your calculations to the nearest whole dollar for the final values.]***Conclusion:**This systematic approach ensures precise allocation of manufacturing overhead, providing insights into costs attributed to each client. This can help in evaluating pricing strategies and maintaining competitive standards in the automotive parts market.For further details and explanations, please refer to the provided information segments or consult with department experts.**Additional Resources:**- [Read the requirements]( **Data Table: Usage of Cost Drivers by Customer Contract**The following table presents a detailed breakdown of the manufacturing overhead and the usage of cost drivers by different customer contracts for the year 2020.| Department | Cost Driver | Manufacturing Overhead in 2020 | Southern Motors | Caesar Motors | Juniper Auto ||----------------|---------------------|-------------------------------:|----------------:|--------------:|-------------:|| **Design** | CAD-design-hours | $35,000 | 150 | 250 | 100 || **Engineering**| Engineering-hours | $25,000 | 130 | 100 | 270 || **Production** | Machine-hours | $220,000 | 300 | 3,700 | 1,000 || **Total** | | $280,000 | | | |### Graphs or Diagrams Explanation:The table summarizes key data regarding the cost drivers associated with different departments (Design, Engineering, and Production) and how these cost drivers have been utilized by three distinct customers: Southern Motors, Caesar Motors, and Juniper Auto.- **Design Department:** The cost driver here is CAD-design-hours, with a total manufacturing overhead of $35,000 in 2020. The usage by customers is as follows: - Southern Motors: 150 hours - Caesar Motors: 250 hours - Juniper Auto: 100 hours- **Engineering Department:** This department's cost driver is Engineering-hours, totaling $25,000 in manufacturing overhead for 2020. The customer usage is: - Southern Motors: 130 hours - Caesar Motors: 100 hours - Juniper Auto: 270 hours- **Production Department:** Machine-hours are the cost driver for Production, with a total overhead of $220,000 in 2020. The breakdown of usage by customers is: - Southern Motors: 300 hours - Caesar Motors: 3,700 hours - Juniper Auto: 1,000 hours- **Total Manufacturing Overhead:** Combining all departments, the total manufacturing overhead for 2020 is $280,000. This data helps in analyzing the distribution of cost drivers across different customer contracts and aids in cost management and planning for future projects.

Variable cost is the cost which is relevant in decision making and change with change in production…

Roadster Company (RC) designs and produces automotive parts. In 2020, actual variable manufacturing overhead is $280,000. RC's simple costing system allocates variable manufacturing overhead to its three customers based on machine-hours and prices its contracts based on full costs. One of its customers has regularly complained of being charged noncompetitive prices, so RC's controller Matthew Draper 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, and engineering. 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 2020 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 RC's manufacturing overhead rate for 2020. (Round your answer to the nearest cent.) Total manufacturing overhead Total machine hours Manufacturing overhead rate 280,000 5,000 56.00 per machine hour Calculate the overhead allocated to each customer using the simple costing method. (Round your answers to the nearest whole dollar.) Machine Overhead Allocated Customer Southern Motors Caesar Motors. Juniper Auto Hours Used www $

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q