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 2.0 dmh 3.0 dmh Testing Department 6.0 1.5 Total machine hours per unit 8.0 dmh 4.5 dmh a. Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base.

A. Per unit overhead allocated to Commercial $960

Per unit overhead allocated to Residential $540

B. Total Costs Commercial$1,100

Total Costs Residential $450

C. Option 2

Explanation:

a. Calculation to Determine the per-unit factory overhead allocated to the commercial and residential motors

First step is to calculate the Plantwide overhead rate

Plantwide overhead rate = 1,080,000 / 9,000

Plantwide overhead rate= $120 per machine hour

Now let calculate the Per unit overhead allocated to Commercial and Residential

Per unit overhead allocated to Commercial = 120 x 8

Per unit overhead allocated to Commercial = $960

Per unit overhead allocated to Residential = 120 x 4.5

Per unit overhead allocated to Residential = $540

b. Calculation to Determine the per-unit factory overhead allocated to the commercial and residential motors

First step is to calculate the Departmental overhead rate in Assembly and Testing

Departmental overhead rate in Assembly = 280,000 / 4,000

Departmental overhead rate in Assembly= $70 per machine hour

Departmental overhead rate in Testing = 800,000 / 5,000

Departmental overhead rate in Testing = $160 per machine hour

Now let calculate the Costs Allocated to Product using Department overhead rate

Costs Allocated to Product using Department overhead rate:

Commercial Residential

Assembly Department 140 210

(2 x 70=140) (3 X 70=210)

Testing Department 960 240

(160 X6=960) (160 X 1.5=240)

Total Costs $1,100 $450

(140+960=$1,100) (210+240=$450)

c. Based on the information given OPTION 2 which says that the management shall tend to consider SINGLE plantwide factory overhead rate methods reason been that this method helps to calculates cost very accurately taking into factor that overheads are evenly applied on basis of direct labor hours. Which is why OPTION 2 will be Recommend to management as a product costing approach, based on the analyses in (a) and (b).