Question

Single plantwide and Multiple production department factory overhead rate methods and product cost distortion Instructions Single Plantwide Method Multiple Production Department Method Final Questions Instructions 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: $577,200.00 1 Fabrication Department factory overhead 2 Assembly Department factory overhead 235,200.00 3 Total $812,400.00 Direct labor hours were estimated as follows: Fabrication Department 5,200 hours Assembly Department 4.900 Total 10.100 hours In addition, the direct labor hours (dih) 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 2.8 dih 1.9 dih Assembly Department 1.9 2.8 Direct labor hours per unit 4.7 dih 4.7 dlh

Answer 1

(a)
Single plantwide factory overhead rate             = Total Estimated Factory Overhead / Estimated Direct labor Hours             = $ 812,400 / 10,100 hours	$ 80.44 per DLH
Gasoline engine ( 4.7 DLH x $ 80.44 )	$ 378.07 per unit
Diesel engine ( 4.7 DLH x $ 80.44)	$ 378.07 per unit