Pineapple Motor Company manufactures two types of specialty electric motors, a c
ID: 2411696 • Letter: P
Question
Pineapple Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple:
1
Assembly Department
$360,000.00
2
Testing Department
900,000.00
3
Total
$1,260,000.00
Direct machine hours were estimated as follows:
In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows:
1
Assembly Department
$360,000.00
2
Testing Department
900,000.00
3
Total
$1,260,000.00
Explanation / Answer
A)
Per-unit factory overhead allocated to the commercial
Assembly department= ($360,000/3000hours)*1.4dmh = $120*1.4dmh = $168
Testing department = ($900,000/6000hours)*2.8dmh = $150*2.8dmh = $420
Total per unit = $168+$420 = $588
Per-unit factory overhead allocated to the residential
Assembly department= ($360,000/3000hours)*1.1dmh = $120*1.1dmh = $132
Testing department = ($900,000/6000hours)*2.2dmh = $150*2.2dmh = $330
Total per unit = $132+$330 = $462
B) Production Department Factory Overhead Rate = Budgeted Department Factory Overhead/ Budgeted Department Allocation Base
Assembly Department Factory Overhead Rate = $360,000/3000direct machine hours = $120
Testing Department Factory Overhead Rate = $900,000/3000direct machine hours = $300
Commercial
Assembly Department = $120*1.4dmh = $168
Testing Department = $300*2.8dmh = $840
Total = $168+$840 = $1008
Residential
Assembly Department = $120*1.1dmh = $132
Testing Department = $300*2.2dmh = $660
Total = $132+$660 = $792
C) The factory overhead determined under the single plantwide factory overhead rate and multiple production department factory overhead rate methods are the same. This is because the rate of direct cost of two departments is the same. However, the two production department overhead rates are different.Thus, Pineapple should consider remaining with single plantwide factory overhead rate.