Reference no: EM131783972

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.