Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion 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 considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple: Assembly Department $197,600   Testing Department 737,200     Total $934,800   Direct machine hours were estimated as follows: Assembly Department 3,800 hours Testing Department 7,600     Total 11,400 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 0.50 dmh 1.00 dmh Testing Department 1.00   2.00   Total machine hours per unit 1.50 dmh 3.00 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 Motor $ per unit Residential Motor $ 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 Motor $ per unit Residential Motor $ per unit

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

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 considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple:

Assembly Department $197,600  
Testing Department 737,200  
  Total $934,800  

Direct machine hours were estimated as follows:

Assembly Department 3,800 hours
Testing Department 7,600  
  Total 11,400 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 0.50 dmh 1.00 dmh
Testing Department 1.00   2.00  
Total machine hours per unit 1.50 dmh 3.00 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 Motor $ per unit
Residential Motor $ 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 Motor $ per unit
Residential Motor $ per unit
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