Product Costs and Product Profitability Reports, using a Single Plantwide Factory Overhead Rate Isaac Engines Inc. produces three products—pistons, valves, and cams—for 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: BudgetedVolume(Units) Direct LaborHours Per Unit Price PerUnit Direct MaterialsPer 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 $235,200. If required, round all per unit answers to the nearest cent. a. Determine the plantwide factory overhead rate.$ per dlh b. Determine the factory overhead and direct labor cost per unit for each product. Direct LaborHours Per Unit Factory OverheadCost Per Unit Direct LaborCost Per Unit Pistons dlh $ $ Valves dlh $ $ Cams dlh $ $ Feedback 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 UnitDirect Labor Cost per Unit = Direct Labor Rate x Direct Labor Hours per Unit 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. Isaac Engines Inc. Product Line Budgeted Gross Profit Reports For the Year Ended December 31, 20Y2 Pistons Valves Cams Revenues $ $ $ Product Costs Direct materials $ $ $ Direct labor Factory overhead Total Product Costs $ $ $ Gross profit (loss) $ $ $ Gross profit percentage of sales % % %
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Product Costs and Product Profitability Reports, using a Single Plantwide Factory
Isaac Engines Inc. produces three products—pistons, valves, and cams—for 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.
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.
| Direct Labor Hours Per Unit |
Factory Overhead Cost Per Unit |
Direct Labor Cost Per Unit |
|
| Pistons | dlh | $ | $ |
| Valves | dlh | $ | $ |
| Cams | dlh | $ | $ |
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
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.
| Isaac Engines Inc. | |||
| Product Line Budgeted Gross Profit Reports | |||
| For the Year Ended December 31, 20Y2 | |||
| Pistons | Valves | Cams | |
| Revenues | $ | $ | $ |
| Product Costs | |||
| Direct materials | $ | $ | $ |
| Direct labor | |||
| Factory overhead | |||
| Total Product Costs | $ | $ | $ |
| Gross |
$ | $ | $ |
| Gross profit percentage of sales | % | % | % |
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