Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

eBook Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion Eclipse Motor Company manufactures two types of specialty electric motors,

image text in transcribed
eBook Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion 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 prod 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 per unit Residential 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. Commercial per unit Residential per unit . Recommend to management a product costing approach, based on your analyses in (a) and (b). 1. The management should consider multiple production department factory overhead rate methods, because this method calculates the cost more accurately and considers the fact that commercial products use more costly overheads than residential products. 2. The management should consider single plantwide factory overhead rate methods, because this method calculates the cost more accurately and considers the fact that the overheads are applied evenly based on the direct labor hours. 3. The management could consider either multiple production department factory overhead rate method or the single plantwide rate, as both these methods have the same effect on the final costs. Check My Work

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting The Cornerstone Of Business Decision Making

Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

8th Edition

0357715349, 978-0357715345

More Books

Students also viewed these Accounting questions

Question

Who should be involved?

Answered: 1 week ago

Question

1. Avoid conflicts in the relationship

Answered: 1 week ago

Question

1. What will happen in the future

Answered: 1 week ago