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) 5,000 Price Per Unit Direct Materials Per Unit Pistons Direct Labor Hours Per Unit 0.50 0.30 0.20 $45 Valves 12,500 Cams 1,500 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 dih b. Determine the factory overhead and direct labor cost per unit for each product. Direct Labor Hours Per Unit 0.5 dlh Factory Overhead Cost Per Unit Direct Labor Cost Per Unit Pistons $ 12.5 Valves 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 Product Costs Total Product Costs Gross profit Gross profit percentage of sales

Answer 1

a.Plantwide factory overhead rate = Total factory overheads/Total labor hours
Total direct labor hours = 5,000*0.5 + 12,500*0.3+1,500*0.2
i.e.	6550
Plantwide rate = 163,750/6550
25.00		per DLH
	Direct Labor hours per unit	Factory overhead cost per unit	Direct labor cost per uni
Pistons	0.5	12.5	15
Valves	0.3	7.5	9
Cams	0.2	5	6
c.
	Pistons	Valves	Cams
Sales Revenue	225,000	212,500	90,000
Product Costs
Direct Material	40,000	37,500	60,000
Direct Labor	75,000	112,500	9,000
Factory overhead	62,500	93,750	7,500
Total product costs	177,500	243,750	76,500
Gross Profit	47,500	-31,250	13,500
% of sales	21.11%	-14.71%	15.00%

1 2 a.Plantwide factory overhead rate = Total factory overheads/Total labor hours 3 Total direct labor hours = 5,000*0.5 + 12,500*0.3+1,500*0.2 4 i.e. 6550 5 Plantwide rate = 163,750/6550 6 =163750/6550 per DLH 1 15 Direct Labor hours per unit Factory overhead cost per unit Direct labor cost per uni 9 Pistons 10.5 =B9*25 =B9*30 10 Valves 0.3 =B10*25 =B10*30 11 Cams 0.2 =B11*25 =B11*30 12 13 14 c. Pistons Valves Cams 16 Sales Revenue =5000*45 =12500*17 =1500*60 17 Product Costs 18 Direct Material -5000*8 =12500*3 =1500*40 19 Direct Labor =5000*15 =1250069 =1500*6 20 Factory overhead =5000*12.5 =12500*7.5 =1500*5 21 Total product costs =SUM(B18:320) =SUM(C18:C20) =SUM(D18:D20) 22 Gross Profit =B16-B21 =C16-C21 =D16-D21 23 % of sales =B22/B16 =C22/C16 =D22/D16