The management of Firebolt Industries Inc. manufactures gasoline and diesel engi

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 tollowing factory overhead was budgeted for Firebolt: 5557.750.00 57.550.00 $815,300.00 1 Fabrication Department factory overhead 2 Assembly Department factory overhead Total Direct labor hours were estimated as follows Fabrication Department 4,850 hours Assembly Department 5,050 Total 9,900 hours In addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined trom engineering records, as follows: Production Departments Gasoline Engine Fabrication Departmen 31 dih Assembly Department 2.1 Direct labor hours per unit 5.2 dih Diesel Engine 2.1 ch 3.1 5.2 ch

Explanation / Answer

Input Fabrication department factory overhead $ 557,750.00 Assembly department factory overhead $ 257,550.00 Total $ 815,300.00 DLH Fabrication department                 4,850 hours Assemby department                 5,050 Total                 9,900 Production Department Gasoline Engine Diesel Engne Fabrication Department 3.1 2.1 Assembly Department 2.1 3.1 Direct labor hours per unit 5.2 5.2 a Single plantwide overhead rate = Total overhead cost ÷ Total Direct labor hours Single plantwide overhead rate = $815,300 ÷ 9,900 = $82.35 per DLH Gasoline Engine = DLH x Overhead Rate 5.2 x $82.35 $          428.22 per unit Diesel Engine = 5.2 x $82.35 $          428.22 per unit b Fabrication department overhead rate = 557750 ÷ 4850 115 per dlh Assembly department overhead rate = 257550 ÷ 5050 51 per dlh Gasoline Engine: Fabrication 3.1 x 115 = 356.5 Assembly 2.1 x 51 = 107.1 $ 463.60 per unit Diesel Engine: Fabrication 2.1 x 115 = 241.5 Assembly 3.1 x 51 = 158.1 $ 399.60 per unit

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.