Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost DistortionThe management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication andAssembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a singleplantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multipleproduction department factory overhead rate method. The following factory overhead was budgeted for Nova:Fabrication Department factory overheadAssembly Department factory overheadTotalDirect labor hours were estimated as follows:Fabrication DepartmentAssembly Department4,500 hours4,5009,000 hoursIn addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineeringused torecords, as follows:$450,000180,000$630,000TotalProduction Departments Gasoline Engine Diesel EngineFabrication Department1.20 dih2.00 dih2.001.20Assembly DepartmentDirect labor hours per unit4.00 din4,00 dih eBookProduction Departments Gasoline Engine Diesel EngineFabrication Department2.80 dlh.Assembly Department1.20Direct labor hours per unit4.00 dih4.00 diha. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead ratemethod, using direct labor hours as the activity base.Gasoline engine sper unitDiesel engineper unitb. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factoryoverhead rate method, using direct labor hours as the activity base for each department.Gasoline engineper unitDiesel engineper unit.c. Recommend to management a product costing approach, based on your analyses in (a) and (b).IManagement should select the multiple department1.20 dih2.80single plantwide✔factory overhead rate method of allocating overhead costs. The✔factory overhead rate method indicates that both products have the same factory overhead per unit. Eachproduct uses the direct labor hours differently ✓. Thus, the multiple department✔rate method avoids the costdistortions by accounting for the overhead in each production department separately

Factory overhead The amount of charges incurred by a company in relation to the factory premises is…

Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion 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: Fabrication Department factory overhead Assembly Department factory overhead Total Direct labor hours were estimated as follows: Fabrication Department Assembly Department Total $450,000 180,000 $630,000 4,500 hours 4,500 9,000 hours In addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records, as follows: 1.20 din 2.00 4.00 dih Production Departments Gasoline Engine Diesel Engine Fabrication Department 2.00 dih Assembly Department 1.20 Direct labor hours per unit 4,00 din

Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion 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: Fabrication Department factory overhead Assembly Department factory overhead Total Direct labor hours were estimated as follows: Fabrication Department Assembly Department Total $450,000 180,000 $630,000 4,500 hours 4,500 9,000 hours In addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records, as follows: 1.20 din 2.00 4.00 dih Production Departments Gasoline Engine Diesel Engine Fabrication Department 2.00 dih Assembly Department 1.20 Direct labor hours per unit 4,00 din

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Plantwide versus Departmental Step Method. Knoxville Company distributes some service department costs to other service departments. However, after a department’s costs have been distributed, no costs are assigned back to it. Buildings and Grounds is distributedfirst, using square feet as a base. The number of employees is used as a base for distributing factory Administration. (Have picture) Required:1. Compute a plantwide overhead rate, using direct labor hours as a base Round your answer to the nearest cent.2. Compute the overhead rate for Machining, using machine hours as a base and for Assembly, using direct labor hours as a base. Round answers to the nearest cent.
Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Eclipse: 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…
Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two,peanut butter is the more popular. Cashew butter is a specialty line using smaller jars and fewerjars per case. Data concerning the two products follow: Annual overhead costs are listed below. These costs are classified as fixed or variable with respect to the appropriate activity driver. Required:1. Prepare a traditional segmented income statement, using a unit-level overhead rate based ondirect labor hours. Using this approach, determine whether the cashew butter product lineshould be kept or dropped.2. Prepare an activity-based segmented income statement. Repeat the keep-or-drop analysisusing an ABC approach.
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $302,300 Number of purchase orders Scheduling $220,600 Number of production orders Materials handling $416,500 Number of moves Product development $755,400 Number of engineering changes Production $1,551,600 Machine hours Number ofPurchaseOrders Number ofProductionOrders NumberofMoves Number ofEngineeringChanges MachineHours NumberofUnits Disk drives 4,160 380 1,320 11 1,900 1,600 Tape drives 2,500 155 770 6 9,900 4,000 Wire drives 12,700 770 3,900 23 10,400 2,700 Determine the activity rate per production order for…
2. Determine the total and per-unit factory overhead costs allocated to each product, using the plantwide overhead rate in (1). Round per unit amounts to the nearest whole cent. Product Snowboards Total Factory Overhead Factory Overhead Per Unit 585,000 585,000 Skis $ 3. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $435,000 and $735,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. Department Cutting Department 87 per direct labor hour 105 per direct labor hour Finishing Department 4. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (3). Round per unit amounts to the nearest whole cent. Product Total Factory Overhead Factory Overhead Per Unit Snowboards Activity Production…
Product Costs and Product Profitability Reports, using a Single Plantwide Factory Overhead Rate Elliott Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Elliott Engines has a very simple production process and product line and uses a single plantwide factory overhead rate to allocate overhead to the three products. The factory overhead rate is based on direct labor hours. Information about the three products for 20Y2 is as follows: Budgeted Volume(Units) Direct LaborHours Per Unit Price PerUnit Direct MaterialsPer Unit Pistons 11,000 0.30 $46 $22 Valves 21,000 0.15 11 4 Cams 2,000 0.20 61 26 The estimated direct labor rate is $26 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Elliott Engines is $191,800. If required, round all per unit answers to the nearest cent. a. Determine the plantwide factory…
Campbell Electronics produces video games in three market categories: commercial, home, and miniature. Campbell has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Unit Batch Product Facility Additional data for each of the product lines follow: Direct materials cost Direct labor cost Number of labor hours Number of machine hours Number of production orders Research and development time Number of units. Square footage Required Total Pooled Cost $ 376,000 206,400 109,600 304,000 Type of Product a. Commercial a. Home a. Miniature Combined total b. Commercial b. Home b. Miniature Combined total Types of Costs Indirect labor wages, supplies,…
Allocate overhead using a single plantwide rate, multiple department rates, and activity-based costing Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor Subassembly Department Final Assembly Department Total The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Setup Quality control Total Budgeted Activity Cost Required: Receivers 80 Loudspeakers 320 Total 400 $400,400 198,800 114,800 $714,000 The activity-base usage quantities and units produced for the two products follow: $138,600 Number of setups 261,800 Number of inspections $400,400 Number of Number of Setups Inspections 450 Activity Base 1,750 2,200 Direct Labor Hours- Subassembly 875 525 1,400 Direct Labor Hours-Final Units Assembly Produced 7,000 7,000 14,000 525 875 1,400 1. Determine a plantwide overhead rate based upon direct…
Single plantwide and multiple production department factory overheadrate methods and product cost distortionThe management of Firebolt Industries Inc. manufactures gasoline anddiesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information inorder to guide product strategy. Presently, the company uses a singleplantwide factory overhead rate for allocating factory overhead to thetwo products. However, management is considering the multipleproduction department factory overhead rate method. The followingfactory overhead was budgeted for Firebolt: Fabrication Department factory overhead $550,000 Assembly Department factory overhead 250,000 Total $800,000 Direct labor hours were estimated as follows: Fabrication Department 5,000 hours Assembly Department 5,000 Total 10,000 hours In addition, the direct labor hours(dlh) used to produce a unit of eachproduct in each department were determined from engineering…
Folsom Company manufactures specialty tools to customer order. There are three producingdepartments. Departmental information on budgeted overhead and various activity measuresfor the coming year is as follows: Currently, overhead is applied on the basis of machine hours using a plantwide rate.However, Janine, the controller, has been wondering whether it might be worthwhile to usedepartmental overhead rates. She has analyzed the overhead costs and drivers for the various departments and decided that Welding and Finishing should base their overhead rates on machinehours and that Assembly should base its overhead rate on direct labor hours.Janine has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 35% markup over full manufacturing cost. Round all overheadrates to the nearest cent. Round all bid prices to the nearest dollar.Required:1. Calculate a plantwide rate for Folsom Company based on machine hours. What is the bidprice of…
please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image) Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows: Support Departments Producing Departments Power GeneralFactory Purchasing Pesticide LiquidFertilizer Overhead $90,000 $314,000 $167,000 $78,900 $107,800 Square feet 1,500 — 1,500 4,200 4,800 Machine hours — 1,403 1,345 24,000 8,000 Purchase orders 20 40 7 120 60 The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase…