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 Testing Department Total $280,000 800,000 $1,000,000 Direct machine hours were estimated as follows: 4,000 hours Assembly Department Testing Department Total 5,000 9,000 hours In addition, the direct machine hours (dm) used to produce a unit of each product in each department were determined from engineering records, as follows Commercial 2.0 dmh 6.0 Residential 3.0 dm Assembly Department Testing Department Total machine hours per unit 15 8.0 dm 4.5 den 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 bas Commercial per unit Residential per unit h Dinh dotherm met the induction matches In addition, the direct machine hours (dm) used to produce a unit of each product in each department were determined from engineering records, as follows: Commercial 20 cm Residential 3.0 dmh 1.5 6.0 Assembly Department Testing Department Total machine hours per unit 8.0 dmh 4.5 dmh .. 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 location base Commercial per unit Residential per un b. Determine the per unit factory overhead located 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 c. 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 plantwin factory overhead rate methods, because this method calolates the cost more accurately and consider the tact that the overheads are applied evenly based on the direct labor hours 3. The management could consider the multiple production department factory overhead rate method or the single plantwide rate, as both these methods have the some effect on the final costs
