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

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 Commercial and Residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base.

Commercial Motor $

per unit

Residential Motor $

per unit

Commercial Motor $

per unit

Residential Motor $

per unit

c$.$ Recommend to management a product costing approach, based on your analyses in $($a$)$ and $($b$).$

The factory overhead determined under the single plantwide factory overhead rate and multiple production department factory overhead rate methods are

i$.$ This is because the ratio of direct machine hours used by each

product from the two departments is

method in this situation.

$.$ However, the two production department overhead rates are

$.$ Thus, Peach should consider

the easier

rate