Saginaw Engine Parts Inc. (SEP) produces three productspistons, valves, and camsfor the heavy equipment industry. SEP 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 2010 is as follows:

	Budgeted Volume (Units)	Direct Labor Hours per Unit	Price per Unit	Direct Materials per Unit
Pistons	6,000	0.20	$42.00	$20.50
Valves	24,000	0.15	10.50	3.25
Cams	1,000	0.32	56.00	24.00

Exercise 26(11)-4

Name:

Section:

Enter the appropriate amount in the shaded cells below.

A red asterisk (*) will appear to the right of an incorrect amount in the outlined cells.

a.

Total estimated labor hours consumed by the three products:

Direct Labor

Total Labor

Volume

x

Hours per Unit

=

Hours

Pistons

x

=

Valves

x

=

Cams

x

=

Total estimated direct labor hours

Next, determine the plantwide overhead rate:

Budgeted Factory Overhead

=

=

Plantwide Allocation Base

b.

Factory Overhead Cost

Direct

per Unit (Plantwide

Direct Labor Cost

Labor Hours

Overhead Rate x Direct

per Unit ($24 x Direct

per Unit

Labors Hours per Unit)

Labor Hours per Unit)

Pistons

Valves

Cams

c.

SAGINAW ENGINE PARTS INC.

Product Line Budgeted Gross Profit Reports

For the Year Ended December 31, 2010

Pistons

Valves

Cams

Revenues

Direct materials

Direct labor

Factory overhead

Gross profit

Gross profit percentage of sales

d.