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 Production Gasoline Departments Engine Direct labor hours were estimated as follows: Fabrication Department Assembly Department Fabrication Department Assembly Department Direct labor hours per unit 3,900 Total 7,800 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: 1.20 2.80 4.00 $663,000 273,000 Total 3,900 hours dlh dlh Diesel Engine $936,000 2.80 dlh 1.20 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
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 Production Gasoline Departments Engine Direct labor hours were estimated as follows: Fabrication Department Assembly Department Fabrication Department Assembly Department Direct labor hours per unit 3,900 Total 7,800 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: 1.20 2.80 4.00 $663,000 273,000 Total 3,900 hours dlh dlh Diesel Engine $936,000 2.80 dlh 1.20 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
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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Transcribed Image Text: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
Fabrication Department
Assembly Department
Direct labor hours were estimated as follows:
Production
Gasoline
Departments Engine
Fabrication
Department
Assembly
Department
3,900 hours
3,900
Total 7,800 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:
Direct labor
hours per unit
1.20
2.80
4.00
$663,000
273,000
dlh
Total
dlh
Diesel
Engine
$936,000
2.80 dlh
1.20
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
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