Single Plantwide and Multiple Production Department Factory Overhead Rate Method

Question

Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion

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.

Explanation / Answer

Answer a

Pantwide factory overhead rate method => 882000 / 8400 => $105 dlh

Gasoline engine => 105 * 3.4 => $357

Diesel engine => 105 * 3.4 => $357

Answer 2

Fabrication department => 630000 / 4200 => $150 Dlh

Assembly Department => 252000 / 4200 => $60 Dlh

Gasoline engine => (1.0 * 150) + (2.4 * 60) => $294

Diesel engine => (2.4 * 150) + (1.0 * 60) => $420

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