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 followingfactory overhead was budgeted for Nova:Fabrication Department factory overheadAssembly Department factory overheadTotalDirect labor hours were estimated as follows:Fabrication DepartmentAssembly DepartmentTotal2.70$429,000195,000$624,000In 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 EngineFabrication Department1.30 dlh2.70 dlhAssembly Department1.30Direct labor hours per unita. 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 unitDiesel engineper unitb. 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 unitDiesel engineper unitc. Recommend to management a product costing approach, based on your analyses in (a) and (b).Management should select theEach product uses the direct labor hours4.00 dlh3,900 hours3,9007,800 hours4.00 dlhfactory overhead rate method of allocating overhead costs. TheThus, thefactory overhead rate method indicates that both products have the same factory overhead per unit.rate method avoids the cost distortions by accounting for the overhead

Name: The management of Nova Industries Inc. manufactures gasoline and dies
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: 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 compan

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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 3,900 hours Assembly Department 3,900 Total 7,800 hours In addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records, follows: Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.30 dlh 2.70 dlh Assembly Department 2.70 1.30 Direct labor hours per unit 4.00 dih 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. $429,000 195,000 $624,000 per unit Gasoline engine $ 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 Each product uses the direct labor hours factory overhead rate method of allocating overhead costs. The Thus, the l factory overhead rate method indicates that both products have the same factory overhead per unit. rate method avoids the cost distortions by accounting for the overhead (