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Pleasee! Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cast Distortion

The management of Nava 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 allocation 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 Now:

Smale Flantwide and Maltiple Production Department factory Overhead Rate Methods and Product Cont Dstortion The mansgement of Nova Industnes Inc. manufactures gasoline and diesel engines through two production departments, Fabncation and Assembly, Manogement needs acournte product cost information in order to guide product strategy, Presently, the company uses a single plantwide factocy overhead rate for allocating factory overhead to the two products. However, management is consideriog the mustiple production department factory overhead rate mechod. The following factory ovechead was budgeted for Nowa: a. Determine the per-unit factory overheod allocated to the gascline and desel eng nes under the single plantwide factory averhead rate method, using direct iatior hous as the activity base. Gascline enginet per unis Diesel engine per unit. b. Determinte the per-unit factory overbead allocated to the gasoline and diesel enpines under the multiple productoon department factory overhesd rate method, ining firect labor hours as the activity base for each departmen. Gasoline engine per unit Diesel engine pet unit c. Recommend to management a product costing approach, based on your analyses in (b) and (b) Management should seipct the factory owerhesd rate method of allocating overhead costa. The factory overhesd rate method indicates that bothy products have the same factory overhead per unit. Each product uses the direct labor hours Thus, the mite method wrouds the cost distortions by accounting for the overbesd

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