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