The management of Firebolt Industries Inc. manufactures gasolineand diesel engines through two production departments, Fabricationand Assembly. Management needs accurate product cost information inorder to guide product strategy. Presently, the company uses asingle plantwide factory overhead rate for allocating factoryoverhead to the two products. However, management is consideringthe multiple production department factory overhead rate method.The following factory overhead was budgeted for Firebolt:
1
Fabrication Department factory overhead
$614,800.00
2
Assembly Department factory overhead
246,750.00
3
Total
$861,550.00
Direct labor hours were estimated as follows:
Fabrication Department 5,300 hours Assembly Department 5,250 Total 10,550 hours
In addition, the direct labor hours (dlh) used to produce a unitof each product in each department were determined from engineeringrecords, as follows:
ProductionDepartments GasolineEngine DieselEngine Fabrication Department 2.9 dlh 1.8 dlh Assembly Department 1.8 2.9 Direct labor hours perunit 4.7 dlh 4.7 dlh
Required: a. Determine the per-unit factory overhead allocated to thegasoline and diesel engines under the single plantwide factoryoverhead rate method, using direct labor hours as the activity base. If required, round all per-direct labor hours and per-unitanswers to the nearest cent.
Gasoline engine per unit Diesel engine per unit
b. Determine the per-unit factory overhead allocated to thegasoline and diesel engines under the multiple productiondepartment factory overhead rate method, using direct labor hoursas the activity base for each department. If required, round allper-unit answers to the nearest cent.
Gasoline engine per unit Diesel engine per unit
c. (1) Recommend to management aproduct costing approach, based on your analyses in (a) and (b).(2) Give a reason for your answer. *If required, round allper-unit answers to the nearest cent.
PLEASE MAKE THE ANSWERS UNDERSTANDABLE. THANKS
The management of Firebolt Industries Inc. manufactures gasolineand diesel engines through two production departments, Fabricationand Assembly. Management needs accurate product cost information inorder to guide product strategy. Presently, the company uses asingle plantwide factory overhead rate for allocating factoryoverhead to the two products. However, management is consideringthe multiple production department factory overhead rate method.The following factory overhead was budgeted for Firebolt:
1 | Fabrication Department factory overhead | $614,800.00 |
2 | Assembly Department factory overhead | 246,750.00 |
3 | Total | $861,550.00 |
Direct labor hours were estimated as follows:
| Fabrication Department | 5,300 | hours |
| Assembly Department | 5,250 | |
| Total | 10,550 | hours |
In addition, the direct labor hours (dlh) used to produce a unitof each product in each department were determined from engineeringrecords, as follows:
| ProductionDepartments | GasolineEngine | DieselEngine |
| Fabrication Department | 2.9 dlh | 1.8 dlh |
| Assembly Department | 1.8 | 2.9 |
| Direct labor hours perunit | 4.7 dlh | 4.7 dlh |
| Required: | ||||||||||||
| a. Determine the per-unit factory overhead allocated to thegasoline and diesel engines under the single plantwide factoryoverhead rate method, using direct labor hours as the activity base. If required, round all per-direct labor hours and per-unitanswers to the nearest cent.
b. Determine the per-unit factory overhead allocated to thegasoline and diesel engines under the multiple productiondepartment factory overhead rate method, using direct labor hoursas the activity base for each department. If required, round allper-unit answers to the nearest cent.
|
PLEASE MAKE THE ANSWERS UNDERSTANDABLE. THANKS
Related questions
Stewart Marketing Inc. manufactures two products, A andB. Presently, the company uses a single plant-wide factory overheadrate for allocating overhead to products. However, management isconsidering moving to a multiple department rate system forallocating overhead. From the following information, using a singleplant-wide rate, determine the overhead rate per unit for ProductA:
|
|
| ||
A | B | |||
| Painting Dept. | $248,000 | 10,000 dlh | 16 dlh | 4 dlh |
| Finishing Dept. | 72,000 | 10,000 | 4 | 16 |
| Totals | $320,000 | 20,000 dlh | 20 dlh | 20 dlh |
======== | ========== | ====== | ====== | |
| $496.00 per unit |
| $320.00 per unit |
| $144.00 per unit |
| $640.00 per unit |
Stewart Marketing Inc. manufactures two products, A andB. Presently, the company uses a single plant-wide factory overheadrate for allocating overhead to products. However, management isconsidering moving to a multiple department rate system forallocating overhead. From the following information, using a singleplant-wide rate, determine the overhead rate per unit for ProductB:
| Overhead | Direct Labor Hours (dlh) | Product | ||
| A | B | |||
| Painting Dept. | $248,000 | 10,000 dlh | 16 dlh | 4 dlh |
| Finishing Dept. | 72,000 | 10,000 | 4 | 16 |
| Totals | $320,000 | 20,000 dlh | 20 dlh | 20 dlh |
| ======== | ========== | ====== | ====== | |
| $320.00 |
| $496.00 |
| $144.00 |
| $640.00 |
The single plantwide factory overhead rate is $52 perdirect labor hour. The company implements activity-based costingusing four different activity bases, including direct labor hours(and three others). What can be said about the direct labor rateunder activity-based costing relative to the single plantwiderate?
| The direct labor rate under activity-based costing will beequal to $52 per direct labor hour. |
| The direct labor rate under activity-based costing cannot becompared meaningfully to the $52 per direct labor hour rate. |
| The direct labor rate under activity-based costing must be lessthan $52 per direct labor hour. |
| The direct labor rate under activity-based costing must begreater than $52 per direct labor hour. |
The Nite Lite Factory produces two products - smalllamps and desk lamps. It has two separate departments - finishingand production. The overhead budget for the finishing department is$550,000, using 500,000 direct labor hours. The overhead budget forthe production department is $400,000 using 80,000 direct laborhours. If the budget estimates that a desk lamp will require 1hours of finishing and 2 hours of production, how much factoryoverhead will be allocated to each unit of desk lamps using themultiple production department factory overhead rate method with anallocation base of direct labor hours?
| $11.10 |
| $10.00 |
| $4.91 |
| $5.00 |
The Delph Company produces two products, Blinks andDinks. They are manufactured in two departments, Fabrication andassembly. Data for the products and departments are listedbelow.
| Product | Number of units | Labor hrs per unit | Machine hours per unit |
| Blinks | 1,000 | 4 | 5 |
| Dinks | 2,000 | 2 | 8 |
All of the Machine hours take place in the Fabricationdepartment, which has an estimated overhead of $84,000. All of thelabor hours take place in the Assembly department, which has anestimated total overhead of $72,000.
The Delph Company usesa departmental overheadrates. The fabrication department uses machinehours for an allocation base, and the assembly department useslabor hours. What is the overhead cost per unit forDinks?
| $64 |
| $44 |
| $56 |
| $50 |
