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 $430,000 Assembly Department factory overhead 172,000 Total $602,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
100%

If possible, please fill in boxes using data from pictures. Thank you!

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
$430,000
Assembly Department factory overhead
172,000
Total
$602,000
Direct labor hours were estimated as follows:
Fabrication Department
4,300 hours
Assembly Department
4,300
Total
8,600 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:
Transcribed Image Text: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 $430,000 Assembly Department factory overhead 172,000 Total $602,000 Direct labor hours were estimated as follows: Fabrication Department 4,300 hours Assembly Department 4,300 Total 8,600 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
1.20 dlh
2.80 dlh
Assembly Department
2.80
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
$4
per unit
Diesel engine
per unit
Transcribed Image Text:Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.20 dlh 2.80 dlh Assembly Department 2.80 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 $4 per unit Diesel engine per unit
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Database design
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education