Question

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:

Fabrication Department factory overhead

$577,200.00

Assembly Department factory overhead

235,200.00

Total

$812,400.00

Direct labor hours were estimated as follows:

Fabrication Department                5,200     hours

Assembly Department                 4,900    

Total                                                      10,100   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                2.8 dlh                                   1.9 dlh

Assembly Department                 1.9                                          2.8

Direct labor hours per unit           4.7 dlh                                   4.7 dlh

Required:

1. 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.

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.

Gasoline engine	per unit
Diesel engine	per unit

2. 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.
3. 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.

Gasoline engine	per unit
Diesel engine	per unit

Answer 1

Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plant wide factory overhead rate method, using direct labor hours as the activity base.
Total overhead cost				$         812,400
Divided by: Total labor hours				10,100
Overhead rate per-direct labor hour				$              80.44
Overhead allocated
			Gasoline engine	Diesel engine
Direct labor hours per unit			4.70	4.70
Multiply: Overhead rate per-direct labor hour			$            80.44	$              80.44
Per-unit factory overhead allocated			$          378.07	$           378.07
Gasoline engine			$          378.07	per unit
Diesel engine			$          378.07	per unit
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.
			Fabrication Department	Assembly Department
Department factory overhead			$        577,200	$         235,200
Divided by: Direct labor hours			5,200	4,900
Overhead rate per-direct labor hour			$          111.00	$              48.00
Fabrication Department Overhead allocated
			Gasoline engine	Diesel engine
Direct labor hours per unit			2.80	1.90
Multiply: Overhead rate per-direct labor hour			$          111.00	$           111.00
Per-unit Fabrication Department overhead allocated			$          310.80	$           210.90
Assembly Department Overhead allocated
			Gasoline engine	Diesel engine
Direct labor hours per unit			1.90	2.80
Multiply: Overhead rate per-direct labor hour			$            48.00	$              48.00
Per-unit Assembly Department overhead allocated			$            91.20	$           134.40
			Gasoline engine	Diesel engine
Per-unit Fabrication Department overhead allocated			$          310.80	$           210.90
Per-unit Assembly Department overhead allocated			$            91.20	$           134.40
Per-unit factory overhead allocated			$          402.00	$           345.30
Gasoline engine			$          402.00	per unit
Diesel engine			$          345.30	per unit