iv. How else might FCA use the information available from its department-by-departmentanalysis of manufacturing overhead costs?v. FCA’s managers are wondering if they should further refine the department-by department costing system into an ABC system by identifying different activities within each department. Discuss the two (2) advantages and two (2) disadvantages of an ABC system, if it is to be implemented in this context? The Fleming Company of Anguilla (FCA) designs and produces automotive parts. In 2019, actualvariable manufacturing overhead is $280,000. FCA's simple costing system allocates variablemanufacturing overhead to its three customers based on machine-hours and prices its contractsbased on full costs. One of its customers has regularly complained of being chargednoncompetitive prices, so FCA's controller Matthias Hodge realizes that it is time to examine theconsumption of overhead resources more closely. He knows that there are three main departmentsthat consume overhead resources: design, production, and engineering. Interviews with thedepartment personnel and examination of time records yield the following detailed information:Usage of Cost of Drivers by CustomerContractManufacturingGumbsConnorRichardsonOverhead in 2019MotorsMotorsAutoDepartmentDesignCost DriverCAD design hours$ 35,00015025010025,000220,000ProductionEngineering hours1301002703003,7001,000EngineeringTotalMachine hours$280,000

Cost Accounting: Cost accounting is characterized as "an efficient arrangement of strategies for…

Answered: The Fleming Company of Anguilla (FCA)…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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iv. How else might FCA use the information available from its department-by-department
analysis of manufacturing overhead costs?

v. FCA’s managers are wondering if they should further refine the department-by department costing system into an ABC system by identifying different activities within each department. Discuss the two (2) advantages and two (2) disadvantages of an ABC system, if it is to be implemented in this context?

The Fleming Company of Anguilla (FCA) designs and produces automotive parts. In 2019, actual
variable manufacturing overhead is $280,000. FCA'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 FCA's controller Matthias Hodge 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:
Usage of Cost of Drivers by Customer
Contract
Manufacturing
Gumbs
Connor
Richardson
Overhead in 2019
Motors
Motors
Auto
Department
Design
Cost Driver
CAD design hours
$ 35,000
150
250
100
25,000
220,000
Production
Engineering hours
130
100
270
300
3,700
1,000
Engineering
Total
Machine hours
$280,000

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