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: 1 = 1 Fabrication Department factory overhead $455,000.00 2 = Direct labor hours were estimated as follows: 2 Assembly Department factory overhead 286,200.00 Total $741,200.00 2 = Fabrication Department 4,550 hours Assembly Department 5,400 Total 9,950 hours 3 = 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: Required: Determine the per-unit factory overhead allocated to the gasoline and 4 = a. diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.* 3 = Production Departments Gasoline Engine Diesel Engine Fabrication Department 2.9 dlh 2.2 dih 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.* (1) Recommend to management a product costing approach, based on Assembly Department 2.2 2.9 Direct labor hours per unit 5.1 dlh 5.1 dih С. your analyses in (a) and (b). (2) Give a reason for your answer. *If required, round all per-unit answers to the nearest cent.
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: 1 = 1 Fabrication Department factory overhead $455,000.00 2 = Direct labor hours were estimated as follows: 2 Assembly Department factory overhead 286,200.00 Total $741,200.00 2 = Fabrication Department 4,550 hours Assembly Department 5,400 Total 9,950 hours 3 = 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: Required: Determine the per-unit factory overhead allocated to the gasoline and 4 = a. diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.* 3 = Production Departments Gasoline Engine Diesel Engine Fabrication Department 2.9 dlh 2.2 dih 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.* (1) Recommend to management a product costing approach, based on Assembly Department 2.2 2.9 Direct labor hours per unit 5.1 dlh 5.1 dih С. your analyses in (a) and (b). (2) Give a reason for your answer. *If required, round all per-unit answers to the nearest cent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
snhu acc 202 Single plantwide and Multiple production department factory
Transcribed Image Text: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:
1 =
1 Fabrication Department factory overhead
$455,000.00
2 = Direct labor hours were estimated as follows:
2 Assembly Department factory overhead
286,200.00
Total
$741,200.00
2 =
Fabrication Department 4,550 hours
3
Assembly Department 5,400
Total
9,950 hours
3 = 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:
Required:
Determine the per-unit factory overhead allocated to the gasoline and
4 = a.
diesel engines under the single plantwide factory overhead rate method, using
direct labor hours as the activity base.*
3 =
Production Departments Gasoline Engine Diesel Engine
Fabrication Department
2.9 dlh
2.2 dlh
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.*
(1) Recommend to management a product costing approach, based on
Assembly Department
2.2
2.9
Direct labor hours per unit 5.1 dlh
5.1 dlh
С.
your analyses in (a) and (b). (2) Give a reason for your answer.
*If required, round all per-unit answers to the nearest cent.
Transcribed Image Text: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. If required, round all per-direct labor hours and per-unit
answers to the nearest cent. 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. If required,
round all per-unit answers to the nearest cent. Gasoline engine $
per unit. Diesel engine $
per unit
c. (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). (2) Give a reason for
your answer.
(1)
A= Management should continue to use the single plantwide overhead rate method.
B=Management should change to the multiple production department factory overhead rate method.
C=Managementis indifferent, since either method yields the same result.
(2)
A= In this case, the factory overhead rates for each product are the same under either method; therefore, the company
should choose single plantwide method since it's easier to implement.
B=In this case, the single plantwide method causes cost distortion, so the multiple production department method should
be used.
C=In this case, the multiple production department method causes cost distortion, so the single plantwide method should
be used.
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