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Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Cobalt Engines Inc. manufactures gasoline and diesel engines
Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Cobalt Engines 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 sinqle 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 Cobalt: Direct labor hours were estimated as follows: 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: Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the sinqle plantwide factory overhead rate method, usinq direct labor hours as the activity base. Gasoline enqine $ per unit Diesel engine $ per unit Determine the per-unit factory overhead allocated to the gasoline and diesel enqines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department. Gasoline engine $ per unit Diesel engine $ per unit
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