Single PlantwideandMultiple Production Department Factory Overhead Rate Methodsand Product Cost Distortion

Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, 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 Eclipse:

Assembly Department$280,000Testing Department800,000Total$1,080,000Direct machine hours were estimated as follows:

Assembly Department4,000hoursTesting Department5,000Total9,000hoursIn addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows:

CommercialResidentialAssembly Department2.0dmh3.0dmhTesting Department6.01.5Total machine hours per unit8.0dmh4.5dmha.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.

per unit Comercial $___________

per unit Residential$___________

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

per unit Commercial$______________

per unit Residential$___________