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The management of Firebolt Industries Inc

Accounting

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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:

 

1

Fabrication Department factory overhead

$577,200.00

2

Assembly Department factory overhead

235,200.00

3

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:

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.*

 

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