Plantwide 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 allocating 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 Nova: Fabrication Department factory overhead Assembly Department factory overhead Total Direct labor hours were estimated as follows: $504,000 216,000 $720,000 Fabrication Department Assembly Department Total 3,600 hours 3,600 7,200 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: Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.30 dlh 2.70 dlh Assembly Department 2.70 1.30 Direct labor hours per unit 4.00 dlh 4.00 dlh