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Single plantwide and multiple production department factory overhead rate methods and product cost distortion The...

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Accounting

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 Nova:
\table[[Fabrication Department factory overhead,$481,000
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