Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion Eclipse 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 Eclipse: Assembly Department $280,000 Testing Department 800,000 Total $1,080,000 Direct machine hours were estimated as follows: Assembly Department 4,000 hours Testing Department 5,000 Total 9,000 hours 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: Commercial Residential Assembly Department 2.0 dmh 3.0 dmh Testing Department 6.0 1.5 Total machine hours per unit 8.0 dmh 4:5 dmh a. Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base.
Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion Eclipse 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 Eclipse: Assembly Department $280,000 Testing Department 800,000 Total $1,080,000 Direct machine hours were estimated as follows: Assembly Department 4,000 hours Testing Department 5,000 Total 9,000 hours 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: Commercial Residential Assembly Department 2.0 dmh 3.0 dmh Testing Department 6.0 1.5 Total machine hours per unit 8.0 dmh 4:5 dmh a. Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 6E: Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion
Eclipse 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 Eclipse:
Assembly Department
$280,000
Testing Department
800,000
Total
$1,080,000
Direct machine hours were estimated as follows:
Assembly Department
4,000 hours
Testing Department
5,000
Total
9,000 hours
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:
Commercial
Residential
Assembly Department
2.0 dmh
3.0 dmh
Testing Department
6.0
1.5
Total machine hours per unit
8.0 dmh
4:5 dmh
a. Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct
machine hours as the allocation base.
Previous
Next
Transcribed Image Text:$1,080,000
Total
Direct machine hours were estimated as follows:
Assembly Department
4,000 hours
5,000
Testing Department
Total
9,000 hours
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:
Commercial
Residential
2.0 dmh
3.0 dmh
Assembly Department
Testing Department
6.0
1.5
Total machine hours per unit
8.0 dmh
4.5 dmh
a. Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct
machine hours as the allocation base.
Commercial
%$4
per unit
Residential
per unit
b. Determine the per-unit factory overhead allocated to the commercial and residential motors under the multiple production department factory overhead rate method
using direct machine hours as the allocation base for each department.
Commercial
per unit
Residential
per unit
Previous
Next
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