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(Solution Download) eBook Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product


 

 

 

 

 

 

eBook

 

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

 

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 Cobalt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrication Department

 

factory overhead

$629,000
Assembly Department

 

factory overhead

259,000
Total$888,000

 

Direct labor hours were estimated as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrication

 

Department

3,700hours
Assembly

 

Department

3,700
Total7,400hours

 

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 Department0.70dlh2.10dlh
Assembly Department2.300.90
Direct labor hours per unit3.00dlh3.00dlh

 

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

 

 


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DATE ANSWERED

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