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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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 contractsbased 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: Department Cost Driver ManufacturingOverhead in 2019 Usage of Cost of Drivers by Customer Contract GumbsMotors ConnorMotors RichardsonAutoDesign CAD design hours $ 35,000 150 250 100Production Engineering hours 25,000 130 100 270Engineering Machine hours…
The Fleming Company of Anguilla (FCA) designs and produces automotive parts. In 2019. actual variable manufacturing overhead is $290,000. 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 nonconpetitive prices, so FCA's controller Matthias Hodge reaálizes that it is time to exanine 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 Gumbs Connor Manufacturing Overhead in 2019 Richardson Cost Driver | CAD design hors Engineering hours Machine hours Motors Motors Auto Department Design Production Engineering Total $35,000 250 T00 3,700 150 T30…
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 contractsbased 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 departmentsthat consume overhead resources: design, production, and engineering. Interviews with the department personnel and examination of time records yield the following detailed information: Department Cost Driver ManufacturingOverhead in 2019 Usage of Cost of Drivers by Customer Contract GumbsMotors ConnorMotors RichardsonAutoDesign CAD design hours $ 35,000 150 250 100Production Engineering hours 25,000 130 100 270Engineering Machine hours…
A company has received a special order from a customer to make 5,000 units of acustomized product. The direct materials cost per unit of the customized product is$15, the direct labor cost per unit is $5, and the manufacturing overhead per unit is$18, including $6 of variable manufacturing overhead. If the company has sufficientavailable manufacturing capacity, what is the minimum price that can be accepted forthe special order?a. $24 c. $32b. $26 d. $38
Use the following information for questions 19 and 20 Queen Co. produces two products, A and B. An A unit sells for $60 and costs $20 of direct labor, $10 of direct materials and $5 of variable manufacturing overhead to produce. $10 of fixed overhead is allocated to the product from machinery used to produce both products. Queen has the capacity to produce 20,000 units a month and currently produces 15,000 units. 19) A new customer has requested an order of 1,000 A units at $50 a unit. Queen should A) Reject the order because the price is not $60 B) Accept the order because it would only cost $35 a unit to produce them and Queen would make $15 a unit C) Reject the order because the average cost to produce an A unit is $45 and Queen would only make $5 a unit D) Tell the customer to go place the order at King Co, Queen’s competitor 20) In Queen’s decision the fixed costs were: A) Relevant to the decision because they were allocated to the products B) Relevant to the decision because they…
-S ! 1 Kando Company currently pays $11 per unit to buy a part for a product it manufactures. Instead, Kando could make the part for per unit costs of $5 for direct materials, $3 for direct labor, and $1 for incremental overhead. Kando normally applies overhead costs using a predetermined rate of 200% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (b) Should Kando make or buy the part? Direct materials Direct labor Overhead Cost to buy Cost per unit Company should: F1 @ 2 W S -6° F2 # 3 חי E D Make 20 F3 $ 4 MAR 29 R Buy F a F4 % 5 8 DII FB I ( N M 9 F9 J K O O < F10 P C
Chapter 6: A Closer Look on Cost Accounting The company makes 2,350 units of product X a year, requiring a total os 3.300 machine hours, 250 orders and 200 inspection hours per year. The product's direct material cost is P201.50 and its direct labor cost in P211.11 per unit. The product sells for P590 per unit. According to the activity-based costing system, the gross margin for product X is? 423,087.50 b. 350,435.50 c. 416,890 d. None of the choice a. 56. The following information is available for Mary Corp. Activity Pool Setups Quality Inspections Assembly (direct labor hour) What is the activity rate for setups? Activity Base 50,000 120,000 400,000 Budgeted Amount 300,000 600,000 2,000,000 a. P5.09 c. РО.75 d. P58.00 b. Рб.00 The activity rate for quality inspection is: с. Рб.00 d. P5.09 a. P5.29 b. P5.00
Test yourself ABC Company is producing three products, A, B and C in Direct labor hours their unit. A В C 10,000 15,000 25,000 Number of orders 15 25 10 placed During the year 2019,the total overhead expenses Machine set up hours 150 300 50 are; Requirement 1. Calculated pre-determined overhead rate if overhead is applied based on the direct labor hours .Compute overhead rates using activity based costing. Determine the difference in the amount of overhead allocated to each Procurement cost RO200,000 Machine set up cost RO100,000 product between the two methods.
A company’s current cost information relating to its production is shown in the table below: Per Unit Sales price $ 43 Direct material $ 7 Direct labor $ 6 Variable overhead $ 4 Fixed overhead $ 4 The company has been approached by a customer with a request for a 200-unit special order. What is the minimum per unit sales price that management would accept for this order, assuming the company has sufficient excess capacity?
Spartan Corp. applies manufacturing overhead based on direct labor hours. For 2023, Spartan Corp. estimated total manufacturing overhead cost to be $250,000 and estimated 50,000 total direct labor hours would be used. In 2023, actual manufacturing overhead incurred was $262,500 and 51,000 direct labor hours were used. Calculate the overhead rate using normal costing. [Select] the nearest cent. YRound your answer to Using normal costing, how much overhead will be applied to cost object that uses 18,500 labor hours. [Select] Round your answer to the nearest dollar.
Christian Banera Company currently manufacturing the 20,000 unit parts it uses in its product production. The cost per unit of this part is computed as follows: Direct materials Direct labor $24.70 16.50 2.30 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 13.40 $56.90 An outside supplier has offered to sell the company all of these parts it needs for $51.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $44,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.…
Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $42. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company's accounting system estimates the following unit product cost for this product: Per Unit Direct materials $ 18 Direct labor 12 Manufacturing overhead 10 Total cost $ 40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order?