Question
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in
The management of Firebolt 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 Firebolt:
1
Fabrication Department factory overhead
$571,200.00
2
Assembly Department factory overhead
253,000.00
3
Total
$824,200.00
Direct labor hours were estimated as follows:
Fabrication Department
5,100
hours
Assembly Department
4,600
Total
9,700
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
Fabrication Department
Gasoline Engine. 2.8 dlh
Diesel Engine. 2.2 dlh
Assembly Department
Gasoline Engine. 2.2
Diesel Engine. 2.8
Direct labor hours per unit
Gasoline Engine. 5.0 dlh
Diesel Engine. 5.0 dlh
Single plantwide method
Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as theactivity base. If required, round all per-direct labor hours and per-unit answers to the nearest cent.
Gasoline engine______per unit
Diesel engine. ______per unit
Multiplant Production method
b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department. If required, round all per-unit answers to the nearest cent.
Gasoline engine_____per unit
Diesel engine. _____per unit
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