1.) The management of Nova 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 Nova:

Fabrication Department factory overhead	$525,000
Assembly Department factory overhead	245,000
	Total	$770,000

Direct labor hours were estimated as follows:

Fabrication Department	3,500	hours
Assembly Department	3,500
	Total	7,000	hours

In addition, the direct labor hours (dlh) 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	1.30	dih	2.70	dih
Assembly Department	2.70		1.30
Direct labor hours per unit	4.00	dih	4.00	dih

a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.

b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department.

Gasoline engine
Diesel engine

2.)

Eclipse 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 a 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 Eclipse:

Assembly Department	$280,000
Testing Department	800,000
	Total	$1,080,000

Direct machine hours were estimated as follows:

Assembly Department	4,000	hours
Testing Department	5,000
	Total	9,000	hours

In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows:

	Commercial	Residential
Assembly Department	2.0	dmh	3.0	dmh
Testing Department	6.0		1.5
Total machine hours per unit	8.0	dmh	4.5	dmh

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.

Commercial
Residential

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.

Commercial
Residential