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Can you please break this down step by step The management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication
Can you please break this down step by step
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 gulde product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is consldering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Nova: Direct Iabor hours were estimated as tollows: 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: Gasoline engine: per unit Diesel engine : per unit base for each department. Gasoline engine : per unit Diesel engine : per unit 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 costs. The factory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the direct labor hours , Thus, the rate method avoids the cost distortions by accounting for theStep by Step Solution
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