Product Costs and Product Profitability Reports, using a Single Plantwide Factor

Question

Product Costs and Product Profitability Reports, using a Single Plantwide Factory Overhead Rate

Flint Engine Parts Inc. (FEP) produces three products—pistons, valves, and cams—for the heavy equipment industry. FEP 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 2014 is as follows:

The estimated direct labor rate is $19 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for FEP is $218,300.

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.

$

c. Use the information above to construct a budgeted gross profit report by product line for the year ended December 31, 2014. 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.

Budgeted Volume
(Units) Direct Labor
Hours Per Unit Price Per
Unit Direct Materials
Per Unit Pistons 6,000 0.30 $33 $16 Valves 22,000 0.15 8 3 Cams 4,000 0.20 44 19

Explanation / Answer

Factory Overhead Rate Factory Overheads/ No of units 6000*.30 1800 218300/6000+22000+4000 22000*.15 3300 218300/32000 4000*.20 800 6.821875 Total Hours 5900 Factory Overhead Rate is $ 6.82 per unit b Direct Labour Hour per unit Overhead cost Direct Labour cost per unit Pistons 0.3 6.82 2.046 Valves 0.15 6.82 1.023 Cams 0.2 6.82 1.364

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