Please do not give solution in image format thanku <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 DepartmentTotal$370,000148,000$518,0003,700 hours3,7007,400 hoursIn addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records,as follows:Production DepartmentsFabrication DepartmentAssembly DepartmentDirect labor hours per unit4.00 diha. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rateGasoline Engine1.20 dih2.80Diesel Engine2.80 dih1.204.00 dih Total7,400 hoursIn addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records,as follows:Production DepartmentsFabrication DepartmentAssembly DepartmentDirect labor hours per unitGasoline Engine1.20 dih2.804.00 dihDiesel Engine2.80 dlhper unit1.204.00 dlha. 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 unitper unitDiesel engine sb. 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 engine $per unitDiesel engine sc. Recommend to management a product costing approach, based on your analyses in (a) and (b).Management should select thefactory overhead rate method of allocating overhead costs. Thefactory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the direct labor hoursThus, therate method avoids the cost distortions by accounting for the overhead

The overhead expenses could be allocated at the plantwide rate or departmental rate. The plantwide…

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 $370,000 148,000 $518,000 3,700 hours 3,700 7,400 hours In addition, the direct labor hours (dih) used to produce alunit of each product in each department were determined from engineering records, as follows: Production Departments Fabrication Department Assembly Department Direct labor hours per unit a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate Gasoline Engine 1.20 dlh 2.80 4.00 dih Diesel Engine. 2.80 dih 1.20 4.00 dih

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q