Question

Sneantude and Production Deady heade Methods and Product Cost Distortion The management of Nove industries to manufactures and destrowwe production department, Fabrication and management des information is to reduce Presently, the company weselaide factory overhead for locating factory overhead to the two products. However, management is considering the murdaction de factory of the factory overhead was doted for Fabrication Department factory over Assembly Department factory overhead 3440.000 200,000 1640,000 Direct labor hours were estimated as follows: Fabrication Department Aby Department 4,000 hours 4,000 8,000 hours In addition, the direct labor hours (o) used to produce a unit of each product in each department were determined from enging records, fotos Production Departments Gasoline Engine Diesel Engine Fabrication Department 6.0 Assembly Department 4.0 6.0 Direct labor hours per unit 10.0 10.0 dih a. Determine the per unit factory overhead allocated to the line und diesel engines under the single plantwide factory rate method, using direct labor hours as the activity Gasoline engine per un Diesel engine b. Determine the per un factory overhead located to the gasoline and deengines under the multiple production department factory overhead rate method using director hours as the activy base for each department Gasoline engine $ per unit Die engine per unit

Answer 1

Solution Requirement a. Wing Sugle Plauturide Factory Quehead Rete Method Step! : Calculation of Planturide Factory Queshead Rate Planturide Factory - Budgeted Factory Querheads Querhead Rate Estimated Total Direct labor Hours $640,000 19 8000 hours $80 per Direct Labor Hour Main Step / Answer: Calculation of Per Unit Factory Querhead allocated Gosline Engine: 10 Direct labor Hours X 680 $800 Diesel Engine: 10 Direct Labor Hours x 880 $800 Ausuer a : Per Unit Factory Overhead allocated & $800 per wint 1$ per unit N Gasoline Engine Diesel Engine $ 800

Requirement b. Using multiple production department Page 2 factory overhead rate method Step): Calculation Departmental Factory Overhead Rete Fabrication Assembly Total Production Department Fatay $440,000 $200,000 Querhead (A) Estimated Direct Labor Hours (B) 4ooo hours 4000 hours Pandution Department Cucobond Rate (A:0) $110 fer have $50 per hour Main Step / Answer: Calculation of Per Unit Factory Overhead allocated Gasoline Engine Diesel Engine Fabrication Department $440 (680X$110 ) (4dch X $110) $660 Asceaubly Departement $ 860 $200 $300 (4 dlh X $50) (6dlhx $50) Pea luit Factory Quechead $740 Answer bo Per Unit Factory Querhead allocated: $860] per unit $740] per unit Gasoline Engine Diesel Engine