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Obj. 2, 3 diesel engines through needs accurate product EX 18-7 Single plantwide and multiple production department factory overhead rate methods and product cost distortion

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Obj. 2, 3 diesel engines through needs accurate product EX 18-7 Single plantwide and multiple production department factory overhead rate methods and product cost distortion B. Diesel engine. The management of Firebolt Industries Inc. manufactures gasoline and diesel engi $370 per unit two production departments, Fabrication and Assembly. Management needs accur cost information in order to guide product strategy. Presently, the company uses plantwide factory overhead rate for allocating factory overhead to the two products management is considering the multiple production department factory overhead rat The following factory overhead was budgeted for Firebolt: products. However, y overhead rate method. Fabrication Department factory overhead Assembly Department factory overhead Total $550,000 250,000 $800,000 Direct labor hours were estimated as follows: Fabrication Department Assembly Department Total 5,000 hours 5,000 10,000 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 Fabrication Department Assembly Department Direct labor hours per unit A. Chapter 18 Activity-Based Costing 921 Gasoline Engine Diesel Engine 3.0 dih 2.0 dih 2.0 3.0 5.0 dlh 5.0 dih 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. 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. Recommend to management a product costing approach, based on your analyses in (A) and (B). Support your recommendation. B. C

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