1. 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:

Department	Dollar Amount
Fabrication Department	$550,000
Assembly Department	250,000
Total Overhead	800,000

Direct labor hours were estimated as follows:

Department	Direct Labor Hours
Fabrication Department	5,000
Assembly Department	5,000
Total Direct Labor Hours	10,000

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	Gasoline Engine	Diesel Engine
Fabrication Department	3.5 dlh	2 dlh
Assembly Department	2	3.5
Total Direct Labor Hours per Unit	5.5 dlh	5.5 dlh

1. 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 the activity base.
2. 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.
3. Recommend to management a product costing approach, based on your analyses in (a) and (b). Support your recommendation.