Question

**Please look at numbers** Please answer only (a) and (b) - thank you in advance! :)

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: Fabrication Department factory overhead $557,750.00 Assembly Department factory overhead 257,550.00 Total $815,300.00

Answer 1

solution: Part a: single plantwide overhead rate=estimated OH/Estimated DLH 815300/9900 82.35 per DLH per-unit factory overhead allocated Gasoline Engine =82.35*5.2 Diesel Engine=82.35*5.2 428.22 per unit 428.22 per unit Part b: Fabrication Department Assembly Department 257550 5,050 51.00 Estimated OH Estimated DLH Overhead rate per DLH 557750 4,850 115.00 per-unit factory overhead allocated Gasoline Engine =115*3.1+51*2.1 Diesel Engine=115*2.1+51*3.1 463.60 per unit 399.60 per unit