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Single Plantwide and Multiple Production Department Pactory Overhead rate Methods and Product Cost Distortion The management of Nowe Industrios Lac. manufactures gasoline and diesel engines through two production departments, Fabneabon and Assembly, Management needs accurate product cost informabion in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factary overhead to the two sroducts, However, manogement is considenng the multiple production department factory overhead rate method. The following foctory overhead was budgeted for Novs: at the setimer base. Casoilne engine : x per und Diesed angine peer unit Direct labor hours per unit dih dih a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hy as the activity base. Gasoline engine $ X per unit Diesel engine per unit b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department foctory overhead rate method, using direct labor hours as the activity base for each department. Gasoline engine per unit Diesel engine perunit c. Recommend to management a product costing approach, based on your analyses in (a) and (b). Marnogement should select the factory overhead rate method of allocating overhend costs. The factory overhead rate method indicates that both products nove the same factory overthead per unit. fach product unes the direct labor hours 1. Thus, the rate method, avoids the cost distortions by accountine for the overhend Fieduace a. Tocal budgeted overhead * Tolai lsbor hours * Departwent factory Overhesd rate b. Department rile = Deperiment Ovartead * tabor houn