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Single plantwide factory overhead rate Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and the budgeted factory overhead cost is $170,880. Overhead is allocated to the three products on the basis of direct labor hours. The products have the tollowing laulgeted production volume and direct latis hours per unit: Budgeted Production Volume Direct Labor Hours Per Unit Flutes 2,200 units 0.8 Clarinets 800 1.6 Oboes 1,100 1.0 If required, round all per unit answers to the nearest cent. a. Determine the single plantwide overhead rate. per direct labor hour b. Use the overhead rate in (a) to determine the amount of total and per-unit overhead allocated to each of the three products Total Factory Overhead Cost Per Unit Factory Overhead Cost Flutes Clarinets dum Oboes Total $748,000 Fabrication Department factory overhead Assembly Department factory overhead 308,000 Total $1,056,000 Direct labor hours were estimated as follows: Fabrication Department 4,400 hours Assembly Department 4,400 8,800 hours Total In addition, the direct labor hours (dih) used to produce a unit of each product in each ceptment were determined from engineering records, as follows: Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.20 dih 2.80 dih Assembly Department 2.80 1.20 Direct labor hours per unit 4.00 dlh 4.00 h a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factury verheed ratn metrou, using direct labor hours as the activity base. Gasoline engine per unit Diesel engine per unit h. 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 per unit per unit Diesel engine c. Recommend to management a product costing approach, based on your analyses in (a) and (b) Management should select the Factory overhead rate method of allocating overhead custs, the factory overhead per unit. Each product uses the direct labor hours Thus, tha factory overhead rate method indicates that both products have the same rate method avoids the cost distortions by accounting for the overhead $748,000 Fabrication Department factory overhead Assembly Department factory overhead 308,000 Total $1,056,000 Direct labor hours were estimated as follows: Fabrication Department 4,400 hours Assembly Department 4,400 8,800 hours Total In addition, the direct labor hours (dih) used to produce a unit of each product in each ceptment were determined from engineering records, as follows: Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.20 dih 2.80 dih Assembly Department 2.80 1.20 Direct labor hours per unit 4.00 dlh 4.00 h a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factury verheed ratn metrou, using direct labor hours as the activity base. Gasoline engine per unit Diesel engine per unit h. 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 per unit per unit Diesel engine c. Recommend to management a product costing approach, based on your analyses in (a) and (b) Management should select the Factory overhead rate method of allocating overhead custs, the factory overhead per unit. Each product uses the direct labor hours Thus, tha factory overhead rate method indicates that both products have the same rate method avoids the cost distortions by accounting for the overhead
