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Listening is everyth eBook Single Mantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Nova Industries Inc, manufactures

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Listening is everyth eBook Single Mantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion 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 guide product strategy. Presently, the company uses a single plantwide factory overhead rate for locating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for over Fabrication Department factory overhead $370,000 Assembly Department factory overhead 140,000 Total 1518,000 Direct labor hours were estimated as follows: Fabrication Department 3,700 hours Assembly Department 3,700 Total 7,400 hours In addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records, as follows: Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.20 ch 2,80 din Assembly Department 2.80 1.20 Direct labor hours per unit 4,00 din a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using director hours at the act base 4.00 din Gasoline engine per unit Check My Work Previous Next eBook Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.20 dih 2.80 din Assembly Department 2.80 Direct labor hours per unit 4,00 din 1.20 4.00 din 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 bas Gasoline engine per unit Diesel engine per unit b. 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 Die engine per unit c Recommend to management a product casting approach, based on your analyses in (a) and (b). Management should sciect the multiple department factory overhead rate method of allocating overhead costs. The single plantwide factory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the direct labor hours differently Thus, the multiple department rate method avoids the cost distortions by accounting for the overhead in each production department separately per unit Feed Check My Won Total budgeted averat. Totaltor hours Department factory overhead role

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