Question

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 wo products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt: $557,750.00 Fabrication Department factory overhead Assembly Department factory overhead 257,550.00 Total $815,300.00

Answer 1

Page No.: Date: factony Oveshad Calaulahon allocated per-unit single plantaidfong direr labor houn using undu the Overhead methoel rate $557750 fabrieahon Oveaheael Ovehead Depetent Departocnt Assem Lly $ 257550 2 $815300 Total fabrcahon Deportment Dicut labor houm Assrmbly 1. 450 2- Diru Labo houn Total 9900 Sngle plentaldl taihoy ovahad vat Total Overhead Total dirr labor houd $815300 $82.35 per dirut labor 9900 hour Per unit factom ovehtad allocated 82.35 X to gasoln evgire 14 5.2 dlh uni $28.22 11 per Per unt foctomy ovrhiad Dieudl Engin allouted to $ 22.35 X S.2 dih $428.22 per unit

Page Date: Page No.: caleudaNon erunit the mulbple p.educkon depotent b. focory ovehead allocated under fackoy Ovehcad rar hour mcthool using dirut Labor acky bar as fachom Ovehod vale & fabritaion dipartnet $557750 4850 houn 116 dircet labor per hour Fa liakon derantnent 257550 Fackon ovehead rat e Asscmblg depevhnt 50SO hown 51 dircet labOr per hour e Asumbty diparbent Diesel engine $116X2.1 dlh reuheads Gasoline engine $115 3.1 dIh Pabricakon = $241-5 356.5 Depataint $51 X3'1 dt $158.1 $51 X 2.1 dih $107.1 Assembly Departm 1 $.399. 6 Total $ 463.6 per unit per unik per un

Page Date: Page No. hould Management produchon depectent tactony hange to the mulkple Oveihrad rate methoal (e) (2) Single plantwide method distorhon the Carr Tn thie so the mulsple cact causes hould be uscol method olepartacnt produchon