Question

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	$420,000.00
2	Testing Department	1,200,000.00
3	Total	$1,620,000.00

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

Residential

Assembly Department

1.4 dmh

1.0 dmh

Testing Department

2.8

2.0

Total machine hours per unit

4.2 dmh

3.0 dmh

Answer 1

Single Plantwide Factory Overhead :-

Single Plantwide Factory Overhead Rate = Total Overhead/Total Direct machine hours

              = $1620000/9000 hours = $180 per DMH

	Commercial	Residential
Overhead	($180 * 4.2 dmh) =$756	($180 * 3 dmh) =$540

Multiple production department factory overhead rate method :-

Assembly Dept = $420000/3000 dmh = $140

Testing Dept = $1200000/6000 dmh = $200

	Commercial	Residential
Assembly Dept	($140 * 1.4 dmh) =$196	($140 * 1 dmh) =$140
Testing Dept	($200 * 2.8 dmh) =$560	($200 * 2 dmh) =$400
Total	$756	$540