the plantwide variable manufacturing overhead rate , Cost Accounting

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Automotive Products  (AP)  designs, manufactures,  and  sells  automotive  parts.  It  has  3 main operating departments: design, engineering, and production. 

1.Design  ñ  the  design  of  parts,  using  state  of  the  art,  computer-aided  design  (CAD) equipment

2. Engineering ñ the prototyping of parts and testing of their specifications 

3. Production ñ the manufacture of parts

For many  years,  AP  had  long-term  contracts  with main  automobile  assembly  companies. These  contracts  had  large  production  runs.  APís  costing  system  allocates  variable manufacturing  overhead  on  the  basis  of  machine-hours.  Real  variable  manufacturing overhead costs  for 2001were Rs.308,600. AP had  3 contracts  in 2001, and  its machine-hours used in 2001 were assigned as follows: 


United Motors                    120

  Holden Motors                2,800

  Leland Vehicle                1,080

  Total                             4,000


1.  Calculate the plantwide variable manufacturing overhead rate for 2001.

2.  Calculate the  variable  manufacturing  overhead  allocated  to  each  contract  in 2001.

3.  What conditions must hold  for machine-hours  to give an accurate estimate of the variable manufacturing overhead  incurred on every individual contract at AP in 2001?


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