Please give me step by step direction on the problem for the answer. Ch 26 pro 5 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 $360,000 Assembly Department factory overhead 144,000 Total $504,000 Direct labor hours were estimated as follows: Fabrication Department 3,600 hours Assembly Department 3,600 Total 7,200 hours 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 1.00 dlh 2.80 dlh Assembly Department 3.00 1.20 Direct labor hours per unit 4.00 dlh 4.00 dlh 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 ___________________ factory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the _________________________direct labor hours ______________________ . Thus, the __________________________ rate method avoids the cost distortions by accounting for the overhead____________________ .
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Please give me step by step direction on the problem for the answer.
Ch 26 pro 5
Single Plantwide and Multiple Production Department Factory
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 | $360,000 | ||
| Assembly Department factory overhead | 144,000 | ||
| Total | $504,000 |
Direct labor hours were estimated as follows:
| Fabrication Department | 3,600 | hours | |
| Assembly Department | 3,600 | ||
| Total | 7,200 | hours |
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 | 1.00 | dlh | 2.80 | dlh |
| Assembly Department | 3.00 | 1.20 | ||
| Direct labor hours per unit | 4.00 | dlh | 4.00 | dlh |
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 ___________________ factory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the _________________________direct labor hours ______________________ . Thus, the __________________________ rate method avoids the cost distortions by accounting for the overhead____________________ .
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