Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion

Mango Computer Company manufactures a desktop and portable computer 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 Mango:

Direct machine hours were estimated as follows:

In addition, the direct machine hours (dmh) 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 desktop and portable computers under the single plantwide factory overhead rate method, using direct machine hours as the allocation base.

Desktop	$ per unit
Portable	$ per unit

b. Determine the per-unit factory overhead allocated to the desktop and portable computers under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department.

Desktop	$ per unit
Portable	$ per unit