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Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Nova 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 Novas Fabrication Department factory overhead $595,000 Assembly Department factory overhead 245,000 Total $840,000 Direct labor hours were estimated as follows: Fabrication Department Assembly Department 3.500 hours 3,500 Total 7,000 hours tradition the direct labor hours (dih used to produce a unit of each product in each department were determined from engineering records as fallons Production Departments Gasoline Engine Diesel Engine Fabrication Department 1.30 dih 2.70 dih Assembly Department 2.70 1.30 Direct labor hours per unit 4.00 din 4.00 dih a. Determine the per unit factory overhead allocated to the gasoline and diesel engines under the sole plantwide factory overhead rate method, using direct labor hours as the activity base Gasoline engine por unt per un Diesel engine b. Determine the percent factory overhead allocated to the one and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department Gasoline engine per unit Diesel engine Der unit

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