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

Isaac Engines Inc. produces three productspistons, valves, and camsfor the heavy equipment industry. Isaac 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	6,000		0.30		$40		$ 9
Valves	13,000		0.50		21		5
Cams	1,000		0.10		55		20

The estimated direct labor rate is $20 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Isaac Engines is $235,200.

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If required, round all per unit answers to the nearest cent.

a. Determine the plantwide factory overhead rate. $fill in the blank 4893aefa4fb0021_1 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	fill in the blank 4893aefa4fb0021_2 dlh	$fill in the blank 4893aefa4fb0021_3	$fill in the blank 4893aefa4fb0021_4
Valves	fill in the blank 4893aefa4fb0021_5 dlh	$fill in the blank 4893aefa4fb0021_6	$fill in the blank 4893aefa4fb0021_7
Cams	fill in the blank 4893aefa4fb0021_8 dlh	$fill in the blank 4893aefa4fb0021_9	$fill in the blank 4893aefa4fb0021_10

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a. First calculate: Volume x Direct Labor Hours per Unit = Direct Labor Hours per Product. Add all product hours for total direct labor hours. Next: Total Budgeted Factory Overhead Total Budgeted Plantwide Allocation Base = Single Plantwide Factory Overhead Rate

b. Calculate: Factory Overhead Cost per Unit = Rate from Req. (a) x Direct Labor Hours per Unit Direct Labor Cost per Unit = Direct Labor Rate x Direct Labor Hours per Unit

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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.

	Pistons	Valves	Cams
Cost of goods soldDirect laborDirect materialsFactory overheadFinished goods inventoryRevenuesWork in processRevenues	$Revenues	$Revenues	$Revenues
Product Costs
Cost of goods soldDirect materialsFinished goods inventoryRevenuesWork in processDirect materials	$Direct materials	$Direct materials	$Direct materials
Cost of goods soldDirect laborFinished goods inventoryRevenuesWork in processDirect labor	Direct labor	Direct labor	Direct labor
Cost of goods soldFactory overheadFinished goods inventoryRevenuesWork in processFactory overhead	Factory overhead	Factory overhead	Factory overhead
Total Product Costs	$fill in the blank c7d0d1fccf9503e_17	$fill in the blank c7d0d1fccf9503e_18	$fill in the blank c7d0d1fccf9503e_19
Gross profit (loss)	$fill in the blank c7d0d1fccf9503e_20	$fill in the blank c7d0d1fccf9503e_21	$fill in the blank c7d0d1fccf9503e_22
Gross profit percentage of sales	fill in the blank c7d0d1fccf9503e_23%	fill in the blank c7d0d1fccf9503e_24%	fill in the blank c7d0d1fccf9503e_25%

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c. Construct your report for each product as: Revenues - Direct Materials - Direct Labor - Factory Overhead = Gross Profit Revenues = Price x Unit Volume Direct Materials = Direct Material Cost per Unit x Unit Volume Direct Labor = Direct Labor Cost per Unit from Req. (b) x Unit Volume Factory Overhead = Factory Overhead Cost per Unit from Req. (b) x Unit Volume Gross Profit Percentage of Sales = Gross Profit Sales

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