Question

Part C Options:

A: The same; different

B: The same; different

C: The same; different

D: Changing to; remaking with

E: single overhead; multiple department overhead

Pineapple Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple Assembly Department $196,800 738,000 Testing Department $934,800 Total Direct machine hours were estimated as follows: Assembly Department 4,100 hours 8,200 Testing Department 12,300 hours Total In addition, the direct machine hours (dmh) used to produce unit of each product in each department were determined from engineering records, as follows: Residential Commercial Assembly Department 0.50 dmh 1.00 dmh 1.00 2.00 Testing Department 1.50 dmh 3.00 dmh Total machine hours per unit a. Determine the per-unit factory overhead allocated to the Commercial and Residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base. per unit Commercial Motor Residential Motor per unit b. Determine the per-unit factory overhead allocated to the Commercial and Residential motors under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department. per unit Commercial Motor $ Residential Motor per unit c. Recommend to management a product costing approach, based on your analyses (a) and (b) The factory overhead determined under the single plantwide factory overhead rate and multiple production department factory overhead rate methods are . This because the ratio of direct machine hours used by each product from the two departments is However, the two production department overhead rates are the easier rate method in this situation. Thus, Peach should consider

Answer 1

(1)Single Plant wide factory overhead = Total budgeted Overheads / estimated total machine hours

=$934800/12300Hours

=76$ per hour

Commercial Motor 1.50 machine hours per unit

Rate * Machine hour = 76$*1.50hours

=114$

Residential motor 3 machine hours per unit

=76$ *3 hours

=228$

b.multiple production department

Costs are allocated on the basis of machine hours for individual departments.

	Assembly department	Testing department
Budgeted overhead	196800	738000
Estimated machine hours	4100	8200
Rate per machine hour	[196800/4100]48$	[738000/8200]90$
	Commercial Motor	Residential Motor
ASSEMBLY DEPARTMENT	24[0.5 dmh*48]	48[1DMH*48$ PER DMH]
TESTING DEPARTMENT	90[1dmh*90]	180[2DMH*90$ PER HOUR]
answer b	114	228

c.

The factory overhead rate by both the Method are SAME

As the ratio of hours used by each product from both department are SAME [1:2]

TWO PRODUCTION DEPARTMENT OVERHEAD RATE are DIFFERENT [ 76$ in a and 48$& 90& in b]

Peach should consider REMAKING WITH the easier SINGLE OVERHEAD RATE method in this situation.