The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt:
|
1 |
Fabrication Department factory overhead |
$614,800.00 |
|
2 |
Assembly Department factory overhead |
246,750.00 |
|
3 |
Total |
$861,550.00 |
Direct labor hours were estimated as follows:
| Fabrication Department | 5,300 | hours |
| Assembly Department | 5,250 | |
| Total | 10,550 | hours |
In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows:
| Production Departments | Gasoline Engine | Diesel Engine |
| Fabrication Department | 2.9 dlh | 1.8 dlh |
| Assembly Department | 1.8 | 2.9 |
| Direct labor hours per unit | 4.7 dlh | 4.7 dlh |
| Required: | |
| a. | Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.* |
| b. | Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department.* |
| c. | (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). (2) Give a reason for your answer. |
| *If required, round all per-unit answers to the nearest cent. |
| Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks! |
| Fire bolt Industries Inc. | ||||
| Answer a | ||||
| Calculation of Plant wide OH Rate | Fabricating | Assembly | Total | Note |
| Manufacturing overhead | 614,800.00 | 246,750.00 | 861,550.00 | A |
| Direct Labor | 5,300.00 | 5,250.00 | 10,550.00 | B |
| Predetermined OH Rate | 81.66 | C=A/B | ||
| Allocated OH to products | Gasoline Engine | Diesel Engine | ||
| Direct Labor | 4.70 | 4.70 | D | |
| Predetermined OH Rate | 81.66 | 81.66 | See C | |
| Allocated OH per unit | 384.00 | 384.00 | E=C*D | |
| Answer b | ||||
| Calculation of Departmental OH Rate | Fabricating | Assembly | Note | |
| Manufacturing overhead | 614,800.00 | 246,750.00 | F | |
| Direct Labor | 5,300.00 | 5,250.00 | G | |
| Predetermined OH Rate | 116.00 | 47.00 | H=F/G | |
| Allocated OH to products | Gasoline Engine | Diesel Engine | ||
| Direct Labor- Fabricating | 2.90 | 1.80 | I | |
| Predetermined OH Rate | 116.00 | 116.00 | See H | |
| OH per unit | 336.40 | 208.80 | ||
| Direct Labor- Assembly | 1.80 | 2.90 | ||
| Predetermined OH Rate | 47.00 | 47.00 | ||
| OH per unit | 84.60 | 136.30 | ||
| Total Allocated OH per unit | 421.00 | 345.00 | J=H*I |
| Answer c 1 |
| (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). |
| Management should use Departmental wide OH Rate. |
| Answer c 2- Reason |
| Because it shows more correct allocation and cost per unit of products on the basis of usage of direct labor hours in both fabricating and assembly department. |
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $614,800.00 2 Assembly Department factory overhead 246,750.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $614,800.00 2 Assembly Department factory overhead 246,750.00...
e management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $614,800.00 2 Assembly Department factory overhead 246,750.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $577,200.00 2 Assembly Department factory overhead 235,200.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $455,000.00 2 Assembly Department factory overhead 286,200.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $577,200.00 2 Assembly Department factory overhead 235,200.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $636,650.00 2 Assembly Department factory overhead 243,000.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $561,600.00 2 Assembly Department factory overhead 241,500.00...
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $636,650.00 2 Assembly Department factory overhead 243,000.00...
he management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: 1 Fabrication Department factory overhead $561,600.00 2 Assembly Department factory overhead 241,500.00...