Kao Engines Inc. produces three products-pistons, valves, and cams-for the heavy equipment industry. Kao Engines production process uses a single plantwide factory overhead rate based upon direct labor hours to allocate overhead to the three products. The three products for 2012 are as Budgeted Volume (Units) Price Per Unit Pistons 7.500 $12 $40 Valves 16.000 6 75 Cams 4,000 20 60 The estimated direct labor rate is $25 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Kao Engines is $377,600. Direct Labor Hours Per Unit Pistons Valves Cams 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. Factory Overhead Direct Labor Hours Per Unit Cost Per Unit Description Product Costs din din 0.40 0.50 0.20 din Selling Price Per Unit c. Use the information provided to construct a budgeted gross profit report by product line for the year ended December 31, 2012. Include the gross profit as a percent of sales in the last line of your report, rounded to one decimal place. Kao Engines Inc. Product Line Budgeted Gross Profit Reports For the Year Ended December 31, 2012 Valves Total product costs Gross profit Gross profit percentage of sales Pistons d. What does the report in (c) indicate to you? Pistons have the Direct Labor Cost Per Unit Cams % gross profit as a percent of sales. Pistons may require a price or cost to manufacture in order to achieve a higher profitability similar to the other two products.
Kao Engines Inc. produces three products-pistons, valves, and cams-for the heavy equipment industry. Kao Engines production process uses a single plantwide factory overhead rate based upon direct labor hours to allocate overhead to the three products. The three products for 2012 are as Budgeted Volume (Units) Price Per Unit Pistons 7.500 $12 $40 Valves 16.000 6 75 Cams 4,000 20 60 The estimated direct labor rate is $25 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Kao Engines is $377,600. Direct Labor Hours Per Unit Pistons Valves Cams 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. Factory Overhead Direct Labor Hours Per Unit Cost Per Unit Description Product Costs din din 0.40 0.50 0.20 din Selling Price Per Unit c. Use the information provided to construct a budgeted gross profit report by product line for the year ended December 31, 2012. Include the gross profit as a percent of sales in the last line of your report, rounded to one decimal place. Kao Engines Inc. Product Line Budgeted Gross Profit Reports For the Year Ended December 31, 2012 Valves Total product costs Gross profit Gross profit percentage of sales Pistons d. What does the report in (c) indicate to you? Pistons have the Direct Labor Cost Per Unit Cams % gross profit as a percent of sales. Pistons may require a price or cost to manufacture in order to achieve a higher profitability similar to the other two products.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Help with C. and D. please
Transcribed Image Text:Product costs and product profitability reports, using a single plantwide factory overhead rate
Kao Engines Inc. produces three products-pistons, valves, and cams-for the heavy equipment industry. Kao Engines' production process uses a single plantwide factory overhead rate based upon direct labor hours to allocate overhead to the three products. The three products for 2012 are as follows:
Budgeted
Volume
(Units)
Pistons
Valves
Cams
Direct Labor
Hours Per Unit
Pistons
7,500
$40
Valves
16,000
75
Cams
4,000
20
60
The estimated direct labor rate is $25 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Kao Engines is $377,600.
Description
If required, round all per unit answers to the nearest cent.
a. Determine the plantwide factory overhead rate.
per dlh
Product Costs
0.40
0.50
0.20
b. Determine the factory overhead and direct labor cost per unit for each product.
Factory Overhead
Cost Per Unit
Direct Labor
Hours Per Unit
dlh
dih
dlh
Total product costs
Gross profit
Gross profit percentage of sales.
Price Per
Unit
c. Use the information provided to construct a budgeted gross profit report by product line for the year ended December 31, 2012. Include the gross profit as a percent of sales in the last line of your report, rounded to one decimal place.
Kao Engines Inc.
Product Line Budgeted Gross Profit Reports
For the Year Ended December 31, 20Y2
Valves
Pistons
%
$12
6
S
d. What does the report in (c) indicate to you?
Pistons have the
Selling Price
Per Unit
%6
$
Direct Labor
Cost Per Unit
Cams
%
gross profit as a percent of sales. Pistons may require a
price or
cost to manufacture in order to achieve a higher profitability similar to the other two products.
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