
Concept explainers
(a)
Single plant-wide factory overhead rate: The rate at which the factory or manufacturing
Formula to compute single plant-wide overhead rate:
To compute: The single plant-wide overhead rate using direct labor hours (DLH) as the allocation base
(a)

Explanation of Solution
Compute single plant-wide overhead rate using DLH as the allocation base.
Step 1: Compute the total number of direct labor hours (DLH) budgeted.
Types of Products | Number of Budgeted Units | × | Number of DLH Per Unit | = | Total Number of Budgeted DLH |
Pistons | 7,200 units | × | 0.20 DLH | = | 1,440 DLH |
Valves | 28,800 units | × | 0.15 DLH | = | 4,320 DLH |
Cams | 1,200 units | × | 0.32 DLH | = | 384 DLH |
Total number of budgeted DLH | 6,144 DLH |
Table (1)
Step 2: Compute single plant-wide overhead rate using DLH as the allocation base.
Note: Refer to Table (1) for value and computation of total number of budgeted DLH.
(b)
To compute: The factory overhead allocated per unit of each product, and direct labor cost per unit.
(b)

Explanation of Solution
Compute the factory overhead allocated per unit for each product.
Types of Products | Single Plant-Wide Overhead Rate | × | Number of DLH Per Unit of Each Product | = | Factory Overhead Per Unit |
Pistons | $30 per DLH | × | 0.20 DLH | = | $6.00 per unit |
Valves | $30 per DLH | × | 0.15 DLH | = | $4.50 per unit |
Cams | $30 per DLH | × | 0.32 DLH | = | $9.60 per unit |
Table (2)
Note: Refer to Step 2 of part (a) for value and computation of single plant-wide overhead rate.
Compute direct labor cost per unit for each product.
Types of Products | Estimated Direct Labor Rate | × | Number of DLH Per Unit of Each Product | = | Direct Labor Cost Per Unit |
Pistons | $20 per DLH | × | 0.20 DLH | = | $4.00 per unit |
Valves | $20 per DLH | × | 0.15 DLH | = | $3.00 per unit |
Cams | $20 per DLH | × | 0.32 DLH | = | $6.40 per unit |
Table (3)
(c)
To draft: Budgeted gross profit report of OC Engines for the year ended December 31, 2016
(c)

Explanation of Solution
Prepare a budgeted gross profit report of OC Engines, by product line, for the year ended December 31, 2016.
OC Engines | |||
Budgeted Gross Profit Report | |||
December 31, 2016 | |||
Pistons | Valves | Cams | |
Revenues | $360,000 | $288,000 | $84,000 |
Direct materials cost | 180,000 | 115,200 | 34,800 |
Direct labor cost | 28,800 | 86,400 | 7,680 |
Factory overhead | 43,200 | 129,600 | 11,520 |
Total product costs | 252,000 | 331,200 | 54,000 |
Gross profit | $108,000 | $(43,200) | $30,000 |
Gross profit as a percent of sales | 30.0% | (15.0)% | 35.7% |
Table (4)
Working Notes:
Compute sales revenues for each product.
Types of Products | Number of Budgeted Units | × | Price Per Unit | = | Sales Revenue |
Pistons | 7,200 units | × | $50 | = | $360,000 |
Valves | 28,800 units | × | 10 | = | 288,000 |
Cams | 1,200 units | × | 70 | = | 84,000 |
Table (5)
Compute direct material cost for each product.
Types of Products | Number of Budgeted Units | × | Direct Material Cost Per Unit | = | Direct Material Cost |
Pistons | 7,200 units | × | $25 | = | $180,000 |
Valves | 28,800 units | × | 4 | = | 115,200 |
Cams | 1,200 units | × | 29 | = | 34,800 |
Table (6)
Compute direct labor cost for each product.
Types of Products | Number of Budgeted Units | × | Direct Labor Cost Per Unit | = | Direct Labor Cost |
Pistons | 7,200 units | × | $4.00 | = | $28,800 |
Valves | 28,800 units | × | 3.00 | = | 86,400 |
Cams | 1,200 units | × | 6.40 | = | 7,680 |
Table (7)
Compute total factory overhead allocated for each product.
Types of Products | Number of Budgeted Units | × | Factory Overhead Per Unit | = | Total Factory Overhead |
Pistons | 7,200 units | × | $6.00 per unit | = | $43,200 |
Valves | 28,800 units | × | 4.50 per unit | = | 129,600 |
Cams | 1,200 units | × | 9.60 per unit | = | 11,520 |
Table (8)
Note: Refer to Table (2) for value and computation of factory overhead per unit.
Compute gross profit as a percent of sales for each product.
Types of Products | Gross Profit | ÷ | Sales Revenues | × | 100 | = | Gross Profit Percentage |
Pistons | $108,000 | ÷ | $360,000 | × | 100 | = | 30.0% |
Valves | (43,200) | ÷ | 288,000 | × | 100 | = | (15.0)% |
Cams | 30,000 | ÷ | 84,000 | × | 100 | = | 35.7% |
Table (9)
Note: Refer to Table (5) for value and computation of sales revenues.
(d)
To discuss: The inferences from the gross profit report.
(d)

Explanation of Solution
Want to see more full solutions like this?
Chapter 26 Solutions
Working Papers, Volume 1, Chapters 1-15 for Warren/Reeve/Duchac's Corporate Financial Accounting, 13th + Financial & Managerial Accounting, 13th
- compared to the individual risks of constituting assets. Question 5 (6 marks) The common shares of Almond Beach Inc, have a beta of 0.75, offer a return of 9%, and have an historical standard deviation of return of 17%. Alternatively, the common shares of Palm Beach Inc. have a beta of 1.25, offer a return of 10%, and have an historical standard deviation of return of 13%. Both firms have a marginal tax rate of 37%. The risk-free rate of return is 3% and the expected rate of return on the market portfolio is 9½%. 1. Which company would a well-diversified investor prefer to invest in? Explain why and show all calculations. 2. Which company Would an investor who can invest in the shares of only one firm prefer to invest in? Explain why. RELEASED BY THE CI, MGMT2023, MARCH 2, 2025 5 Use the following template to organize and present your results: Theoretical CAPM Actual offered prediction for expected return (%) return (%) Standard deviation of return (%) Beta Almond Beach Inc. Palm Beach…arrow_forwardprovide correct answerarrow_forwardPlease solve. The screen print is kind of split. Please look carefully.arrow_forward
- Coronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi- purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000+10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related…arrow_forwardCoronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi- purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000+ 10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related…arrow_forwardThe completed Payroll Register for the February and March biweekly pay periods is provided, assuming benefits went into effect as anticipated. Required: Using the payroll registers, complete the General Journal entries as follows: February 10 Journalize the employee pay. February 10 Journalize the employer payroll tax for the February 10 pay period. Use 5.4 percent SUTA and 0.6 percent FUTA. No employees will exceed the FUTA or SUTA wage base. February 14 Issue the employee pay. February 24 Journalize the employee pay. February 24 Journalize the employer payroll tax for the February 24 pay period. Use 5.4 percent SUTA and 0.6 percent FUTA. No employee will exceed the FUTA or SUTA wage base. February 28 Issue the employee pay. February 28 Issue payment for the payroll liabilities. March 10 Journalize the employee pay. March 10 Journalize the employer payroll tax for the March 10 pay period. Use 5.4 percent SUTA and 0.6 percent FUTA. No employees will exceed the FUTA or SUTA wage base.…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning



