The management of Firebolt Industries Inc. manufactures gasolineand diesel engines through two production departments, Fabricationand Assembly. Management needs accurate product cost information inorder to guide product strategy. Presently, the company uses asingle plantwide factory overhead rate for allocating factoryoverhead to the two products. However, management is consideringthe multiple production department factory overhead rate method.The following factory overhead was budgeted for Firebolt:

1	Fabrication Department factory overhead	$561,600.00
2	Assembly Department factory overhead	241,500.00
3	Total	$803,100.00

Direct labor hours were estimated as follows:

Fabrication Department	4,800	hours
Assembly Department	5,250
Total	10,050	hours

In addition, the direct labor hours (dlh) used to produce a unitof each product in each department were determined from engineeringrecords, as follows:

Production Departments	Gasoline Engine	Diesel Engine
Fabrication Department	3.1 dlh	1.8 dlh
Assembly Department	1.8	3.1
Direct labor hours per unit	4.9 dlh	4.9 dlh

	Required:
a.	Determine the per-unit factoryoverhead allocated to the gasoline and diesel engines under thesingle plantwide factory overhead rate method, using direct laborhours as the activity base.*
b.	Determine the per-unit factoryoverhead allocated to the gasoline and diesel engines under themultiple production department factory overhead rate method, usingdirect labor hours as the activity base for eachdepartment.*
c.	(1) Recommend to management aproduct costing approach, based on your analyses in (a) and (b).(2) Give a reason for your answer.
	*If required, round allper-unit answers to the nearest cent. a. Determine the per-unit factory overhead allocated to thegasoline and diesel engines under the single plantwide factoryoverhead rate method, using direct labor hours as the activity base. If required, round all per-direct labor hours and per-unitanswers to the nearest cent. Gasoline engine per unit Diesel engine per unit b. Determine the per-unit factory overhead allocated to thegasoline and diesel engines under the multiple productiondepartment factory overhead rate method, using direct labor hoursas the activity base for each department. If required, round allper-unit answers to the nearest cent. Gasoline engine per unit Diesel engine per unit c. (1) Recommend to management a product costing approach, basedon your analyses in (a) and (b). (2) Give a reason for youranswer. (1) Management should change to the multiple production departmentfactory overhead rate method. Management is indifferent, since either method yields the sameresult. Management should continue to use the single plantwide overheadrate method. (2) In this case, the factory overhead rates for each product arethe same under either method; therefore, the company should choosesingle plantwide method since it’s easier to implement. In this case, the multiple production department method causescost distortion, so the single plantwide method should be used. In this case, the single plantwide method causes costdistortion, so the multiple production department method should beused.