Assignment
Pineapple Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple:
|
1
|
Assembly Department
|
$240,000.00
|
|
2
|
Testing Department
|
750,000.00
|
|
3
|
Total
|
$990,000.00
|
Direct machine hours were estimated as follows:
|
Assembly Department
|
3,000 hours
|
|
Testing Department
|
6,000
|
|
Total
|
9,000 hours
|
In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows:
|
Commercial
|
Commercial
|
Residential
|
|
Assembly Department
|
1.5 dmh
|
1.0 dmh
|
|
Testing Department
|
3.0
|
2.0
|
|
Total machine hours per unit
|
4.5 dmh
|
3.0 dmh
|
Determine the per-unit factory overhead allocated to the commercial and residential motors under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department.
Department rate = Overhead ÷ Machine hours
Product allocation = Machine hours per product x Department rate; Add both department allocations together to obtain a total per product.