factory overhead was budgeted for Nova:

Fabrication Department factory overhead

Assembly Department factory overhead

Total

Direct labor hours were estimated as follows:

Fabrication Department

Assembly Department

Total

$4,200$ hours

$\frac{4,200}{8,400}$ 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:

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.

Gasoline engine $

per unit

Diesel engine $

per unit

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 the overhead