ACTG 2P31 Lecture 4: LECTURE 4 PART 2
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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.
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PLEASE MAKE THE ANSWERS UNDERSTANDABLE. THANKS
The 2nd time...****I just need the answers. Please round to the nearest cent****** Look at the numbers provided.
The management of Firebolt 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 Firebolt:
1 | Fabrication Department factory overhead | $636,650.00 |
2 | Assembly Department factory overhead | 243,000.00 |
3 | Total | $879,650.00 |
Direct labor hours were estimated as follows:
Fabrication Department | 5,350 | hours |
Assembly Department | 5,400 | |
Total | 10,750 | 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 | 2.9 dlh | 1.9 dlh |
Assembly Department | 1.9 | 2.9 |
Direct labor hours per unit | 4.8 dlh | 4.8 dlh |
Required: | |||||||||
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.* | ||||||||
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.* | ||||||||
c. | (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). (2) Give a reason for your answer. | ||||||||
*If required, round all per-unit answers to the nearest cent Single plantwide Method: 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 . If required, round all per-direct labor hours and per-unit answers to the nearest cent.
Multiple production department method: 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. If required, round all per-unit answers to the nearest cent.
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Teradyne Crystal makes finetableware in its Ireland factory. The following data are taken fromits production plans for 2011.
Direct labor costs | %u20AC | 5,310,000 | ||
Setup costs | 625,000 | |||
Wine Glasses | Commemorative Vases | |||||||
Expected production | 210,000 | units | 10,000 | units | ||||
Direct labor hours required | 252,000 | DLH | 16,000 | DLH | ||||
Machine setups required | 600 | setups | 300 | setups | ||||
Required: | |
1. | Determine the setup cost per unitfor the wine glasses and for the commemorative vases if setup costsare assigned using a single plantwide overhead rate based on directlabor hours. (Do not round intermediatecalculations and round your final answers to 2 decimal places. Omitthe "%u20AC" sign in your response.) |
Cost | |
Wine glasses | %u20AC / unit |
Vases | %u20AC / unit |
2. | Determine setup costs per unit forthe wine glasses and for the commemorative vases if the setup costsare assigned based on the number of setups. (Round your answers to 2decimal places. Omit the "%u20AC" sign in yourresponse.) |
Cost | |
Wine glasses | %u20AC / unit |
Vases | %u20AC / unit |
3. | Which method is better for assigning costs to each product? | ||||
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