Question

Elliott Engines Inc. produces three products-pistons, valves, and cams-for the heavy equipment industry. Elliott Engines has 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: Direct Labor Price Per Direct Materials Budgeted Volume (Units) Hours Per Unit Unit Per Unit $23 12,000 $47 Pistons 0.20 Valves 26,000 0.15 12 4 Cams 4,000 0.30 63 27 The estimated direct labor rate is $27 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Elliott Engines is $240,000. 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 Direct Labor Factory Overhead Hours Per Unit Cost Per Unit Cost Per Unit dlh $ Pistons Valves dlh dlh $ $ Cams c. Use the information above 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. Enter all amounts as positive numbers, except for a negative gross profit/gross profit percentage of sales.

Answer 1

Answer with working is given below

Plantwise overhead rate Factory Overhead $240,000 Direct Labor hours a) $32.00 7,500 Pistons Valves Cams Budgeted Volume Direct Labor hour Total DL Hours 4,000 0.30 1,200 26,000 12,000 0.15 0.20 2,400 3,900 Factory Overhead and Direct Labor cost b) Factory Direct DL Hour он Labour per unit Cost per Cost per unit unit dlh Pistons $6.40 $5.40 0.20 Valves Cams dlh $4.80 $4.05 0.15 dlh $9.60 $8.10 0.30 Overall Sales and product cost wise Elliot Engines Inc Product Line Budgeted Gross Profit Reports Unit Wise c) Elliot Engines Inc Product Line Budgeted Gross Profit Reports For the year Ended December 31, 20Y2 For the year Ended December 31, 20Y2 Pistons Valves Pistons Valves Cams Cams $564,000 $312,000 $252,000 $12.00 $63.00 Selling price $47.00 Selling price Product cost Direct Material Direct Labor Factory Overhead Total Product Cost Product cost Direct Material Direct Labor Factory Overhead Total Product Cost $276,000 $104,000 $108,000 $64,800 $105,300 $32,400 $76,800 $124,800 $38,400 $417,600 $334,100 $178,800 $4.00 $4.05 $4.80 $12.85 $27.00 $8.10 $9.60 $44.70 $23.00 $5.40 $6.40 $34.80 Gross Profit GP % of Sales $12.20 26.0% -$0.85 -7.1 % $18.30 29.0% Gross Profit GP % of Sales $146,400-$22,100 $73,200 -7.1 % 26.0% 29.0% d) Vales have the negative gross profit as a percent of sales. Valves may require a increase in price or reduction in cost to manufacture in order to achieve the same profitability as the other two products