Let's assume Tesla has estimated their total manufacturing overhead costs for the year to be $2,665,000,000 based on the following schedule of expected overhead costs: Estimated Annual Overhead Costs (all numbers in 000's)
Depreciation - Tooling (used to make parts) Depreciation - Machinery Shipping Costs (for parts used in making both cars) Materials Handling Costs Utilities (Electricity, water, etc.) Depreciation (Fremont Factory) Supervisor Salaries Set-up Costs Engineering Support Quality Inspections Estimated Total Annual Overhead $220,000 740,000 260,000 140,000 75,000 90,000 500,000 180,000 215,000 245,000 $2,665,000 [odel 3 and the Model S. Let's also assume that Tesla tracks the following information for each model type that could be used as cost drivers. I Microsoft Search (Alt+Q) Possible Cost Driver Information Just start typing here to bring Amount for Model 3 Amount for Model S Estimated Total features to your fingertips and get in Q2 2019 in Q2 2019 Annual Amount help. Number of units 72,531 9,541 330,000 Direct labor hours 1,589,000 437,529 8,100,000 ? Tell me more Number of machine hours 789,321 124,561 2,855,000 Factory square footage* 6,000,000 3,500,000 9,000,000 Number of setups 145,062 57,185 810,000 Number of inspections 6,236,754 1,689,533 31,750,000 Number of unique parts per vehicle* 8,000 9,000 8,500 Number of shipments 1,800 950 11,000 Number of engineering support calls 61,870 19,200 325,000 Number of parts 580,248,000 85,869,000 2,665,500,000 Number of engineering support hours 185,610 86,400 1,090,000 Number of unique machines used* 200 185 250
Vehicle production number:
Model 3 72,531
Model s/x 14,517
Total 87,048
Part A: Using the previously provided information calculate the per-unit overhead cost for Q2 2019 for Model 3 and Model S based on allocating manufacturing overhead in a normal costing system using machine hours as a single cost driver for manufacturing overhead.
Part B: Select what you believe is the best cost driver for each of the separate overhead costs listed above if Tesla were to use an activity-based costing system. Prepare a schedule that shows the cost driver that should be paired with each overhead cost. You can use a particular cost driver more than once if you believe it is the best cost driver for more than one overhead cost.
Part C: Using the cost drivers you selected for an activity-based costing system in part B above, calculate the per-unit overhead cost for Q2 2019 for Model 3 and Model S based on allocating overhead in a normal costing system using an activity-based costing approach.
Part D: Assume that actual overhead for Q2 2019 is $800,000,000. Adjust your calculations under both Parts A and C to reflect the needed adjustment to actual overhead costs. Hint: the adjustment should be made based on the total allocated overhead to each model before adjustment.
Part E: Provide a brief description and analysis of the differences in the overhead costs per unit that you calculated in Parts A and C above (use the amounts after making the required adjustment in part D). This description and analysis should note the amount and direction of any differences in overhead costs across the two methods for each model and should be focused on the specific reasons for the majority of the difference between these two overhead allocation methods.
Part F: Name at least two business decisions that Tesla may make differently if they use an activity-based costing system rather than a single volume-based cost driver to allocate manufacturing overhead. Be sure to describe why these business decisions are likely to change with an activity-based costing system.
Please explain how you got the answer for each step. Thank you so much!!