Pineapple Motor Company manufactures two types of specialty electric motors, a c
ID: 2583491 • 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 conaidering using the multiple production department factory overhesd rate method. The fallowing factory owerhead was budgeted for Pinespple 240,000.00 50,000.00 990,000.00 Assembly Department Testing Depertment Tota. Direct machine hours were estimated as follows: Ascambly Departman: 3,000 houra Taring Dapartmant 6,000 Tocal 0,000 hours In addition, the direct machine hours (dmh) used to produce unit of each product in each department were determined from engineering records, as follows: Assembly Department Tesling Departmen Total machine hours per un45 dmh 1.0 dmh 20 3.0 dmh 1.5 dmh 3.0 Required A. Determine the per unit factory overhesd alocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base B. Deternmine the par-unit factory overhoad alocated to the commercial and residential motors under the muitiple production department factory overhead rate method, using direct machine hours as the allocation base for each department C. (I) Racommand to managamant a product costing approach, based on your analysas in (A) and (B). (2) Give a raason forExplanation / Answer
A. single plantwide factory overhead rate
budgeted factory overhead = $990000
plantwide allocation base = 9000 direct machine hrs
single plantwide overhead rate = 990000 / 9000
= $ 110 per dmh
B.) multiple production department overhead rate
assembly department : $80 * 1.5 dmh = $120
testing department : $125 * 3dmh = $ 375
assembly department : $80 *1.0 dmh = $ 80
testing department : $125 * 2 dmh = $ 250
C.) 1 ) management is indifferent, since either method yields the same result.
because in both cases, per unit cost is same.
2) in this cass, the factory overhead rates for each producct are the same under either method, therefore, the company should choose single plantwide method since it's easier to implement.
commercial 4.5 dmh * $110 per dmh $ 495 per unit residencial 3 dmh * 110 per dmh $ 330 per unit