Pear Computer Company manufactures a desktop and portable computer through two production departments, Assembly and Testing. Presently, the company uses a single plant-wide 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 Pear: Assembly Department .......$200,000 Testing Department

Pear Computer Company manufactures a desktop and portable computer through two production departments, Assembly and Testing. Presently, the company uses a single plant-wide 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 Pear:

Assembly Department .......$200,000

Testing Department ..........760,000

Total .............$960,000

Direct machine hours were estimated as follows:

Assembly Department .....4,000 hours

Testing Department ......8,000

Total .............12,000 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:


Pear Computer Company manufactures a desktop and portable comput


a. Determine the per-unit factory overhead allocated to the desktop and portable computers under the single plant-wide factory overhead rate method, using direct machine hours as the allocation base.
b. Determine the per-unit factory overhead allocated to the desktop and portable computers under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department.
c. Recommend to management a product costing approach, based on your analyses in (a) and (b). Support yourrecommendation.

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Related Book For answer-question

Managerial Accounting

10th Edition

Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac

ISBN: b010ikdqzm