The management of Nova 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 Nova:

Direct labor hours were estimated as follows:

Fabrication Department

Assembly Department

Total

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:

a$.$ 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.

Gasoline engine :

per unit

Diesel engine $

per unit

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.

Gasoline engine :

per unit

Diesel engine $

per unit

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

Management should select the

factory overhead rate method of allocating overhead costs. The

method indicates that both products have the same factory overhead per unit. Each product uses the direct labor hours

factory overhead rate

: rate method avoids the cost distortions by accounting for the overhead

$?$ Thus, the

$?.$ Thus, the