Assembly
Department
$280,000
Testing
Department
800,000
Total
$1,080,000
Direct
machine
hours
were
estimated
as
follows:
Assembly
Department
4,000
hours
Testing
Department
5,000
Total
9,000
hours
In
addition,
the
direct
machine
hours
(dmh)
used
to
produce
a
unit
of
each
product
in
each
department
were
determined
from
engineering
records,
as
follows:
Commercial
Residential
Assembly
Department
2.0
dmh
3.0
dmh
Testing
Department
6.0
1.5
Total
machine
hours
per
unit
8.0
dmh
4.5
dmh
a.
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.
Commercial
v
per
unit
Residential
V'
per
unit
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.
Commercial
§
1,100
|
v
per
unit
Residential
Vv
per
unit
c.
Recommend
to
management
a
product
costing
approach,
based
on
your
analyses
in
(a)
and
(b).
1.
The
management
should
consider
multiple
production
department
factory
overhead
rate
methods,
because
this
method
calculates
the
cost
more
accurately
and
considers
the
fact
that
commercial
products
use
more
costly
overheads
than
residential
products.
2.
The
management
should
consider
single
plantwide
factory
overhead
rate
methods,
because
this
method
calculates
the
cost
more
accurately
and
considers
the
fact
that
the
overheads
are
applied
evenly
based
on
the
direct
labor
hours.
3.
The
management
could
consider
either
multiple
production
department
factory
overhead
rate
method
or
the
single
plantwide
rate,
as
both
these
methods
have
the
same
effect
on
the
final
costs.
1
v
/
