Product Costs and Product Profitability Reports, using a Single Plantwide Factor
ID: 2437793 • Letter: P
Question
Product Costs and Product Profitability Reports, using a Single Plantwide Factory Overhead Rate
Elliott Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Elliott Engines has a very simple production process and product line and uses a single plantwide factory overhead rate to allocate overhead to the three products. The factory overhead rate is based on direct labor hours. Information about the three products for 20Y2 is as follows:
Budgeted Volume (Units) Direct Labor Hours Per Unit Price Per Unit Direct Materials Per Unit
Pistons 5,000 0.50 $45 $ 8
Valves 12,500 0.30 17 3
Cams 1,500 0.20 60 40
The estimated direct labor rate is $30 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Elliott Engines is $163,750. If required, round all per unit answers to the nearest cent.
a. Determine the plantwide factory overhead rate.
$____ per dlh
b. Determine the factory overhead and direct labor cost per unit for each product.
Direct Labor Hours Per Unit Factory Overhead Cost Per Unit Direct Labor Cost Per Unit
Pistons ____dlh $____ $____
Valves ____dlh $____ $____
Cams ____dlh $____ $____
c. Use the information provided to construct a budgeted gross profit report by product line for the year ended December 31, 20Y2. Include the gross profit as a percent of sales in the last line of your report, rounded to one decimal place. Enter all amounts as positive numbers, except for a negative gross profit/gross profit percentage of sales.
Orange County Engine Parts Inc.
Product Line Budgeted Gross Profit Reports
For the Year Ended December 31, 20Y2
Pistons Valves Cams
Revenues $____ $____ $____
Product Costs
Direct Materials $____ $____ $____
Direct Labor $ $ $
Factory Overhead $ $ $
Total Product Costs $ $ $
Gross profit $ $ $
Gross profit percentage of sales % % %
Explanation / Answer
Budgeted Volume(Units) Direct Lab Hours per unit Price per Unit Direct Mat per Unit Direct Labor hours expected Revenues Pistons 5000 0.5 $45 $8 2500 $225,000 Valves 12500 0.3 17 3 3750 $212,500 Cams 1500 0.2 60 40 300 $90,000 TOTAL 6550 a) plant wide factory overhead rate = 163750/6550 = $25 per DLH b) Direct Lab hrs per unit Factory overhead per unit Direct Labor Cost per unit Pistons 0.5 12.5 15 Valves 0.3 7.5 9 Cams 0.2 5 6 c) Product Line Budgeted Gross Profit Reports Pistons Valves Cams Revenues $225,000 $212,500 $90,000 Less:Product Costs: Direct Materials 40000 $37,500 $60,000 Direct Labor 75000 $112,500 $9,000 Fact. Overhead 62500 $93,750 $7,500 Total Product costs 177500 243750 76500 Gross Profit $47,500 ($31,250) $13,500 Gross profit percentage of sales 21.11% -14.71% 15%
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