Product Costs and Product Profitability Reports, using a Single Plantwide Factory Overhead Rate Elliott Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Elliott 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 11,000 0.30 $46 $22 Valves 21,000 0.15 11 4 Cams 2,000 0.20 61 26 The estimated direct labor rate is $26 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 $191,800. If required, round all per unit answers to the nearest cent. a. Determine the plantwide factory overhead rate. $fill in the blank 96da2800503d01d_1 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 fill in the blank 96da2800503d01d_2 dlh $fill in the blank 96da2800503d01d_3 $fill in the blank 96da2800503d01d_4 Valves fill in the blank 96da2800503d01d_5 dlh $fill in the blank 96da2800503d01d_6 $fill in the blank 96da2800503d01d_7 Cams fill in the blank 96da2800503d01d_8 dlh $fill in the blank 96da2800503d01d_9 $fill in the blank 96da2800503d01d_10 Learning Objective 2. 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. Elliot Engines Inc. Product Line Budgeted Gross Profit Reports For the Year Ended December 31, 20Y2 Pistons Valves Cams Revenues $fill in the blank d3768bff0078053_2 $fill in the blank d3768bff0078053_3 $fill in the blank d3768bff0078053_4 Product Costs Direct materials $fill in the blank d3768bff0078053_6 $fill in the blank d3768bff0078053_7 $fill in the blank d3768bff0078053_8 Direct labor fill in the blank d3768bff0078053_10 fill in the blank d3768bff0078053_11 fill in the blank d3768bff0078053_12 Factory overhead fill in the blank d3768bff0078053_14 fill in the blank d3768bff0078053_15 fill in the blank d3768bff0078053_16 Total Product Costs $fill in the blank d3768bff0078053_17 $fill in the blank d3768bff0078053_18 $fill in the blank d3768bff0078053_19 Gross profit $fill in the blank d3768bff0078053_20 $fill in the blank d3768bff0078053_21 $fill in the blank d3768bff0078053_22 Gross profit percentage of sales fill in the blank d3768bff0078053_23% fill in the blank d3768bff0078053_24% fill in the blank d3768bff0078053_25% d. What does the report in (c) indicate to you? Valves have the lowest gross profit as a percent of sales. Valves may require a higher price or lower cost to manufacture in order to achieve the same profitability as the other two products.
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 Overhead Rate
Elliott Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Elliott 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 | 11,000 | 0.30 | $46 | $22 | ||||
| Valves | 21,000 | 0.15 | 11 | 4 | ||||
| Cams | 2,000 | 0.20 | 61 | 26 |
The estimated direct labor rate is $26 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 $191,800.
If required, round all per unit answers to the nearest cent.
a. Determine the plantwide factory overhead rate.
$fill in the blank 96da2800503d01d_1 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 | fill in the blank 96da2800503d01d_2 dlh | $fill in the blank 96da2800503d01d_3 | $fill in the blank 96da2800503d01d_4 |
| Valves | fill in the blank 96da2800503d01d_5 dlh | $fill in the blank 96da2800503d01d_6 | $fill in the blank 96da2800503d01d_7 |
| Cams | fill in the blank 96da2800503d01d_8 dlh | $fill in the blank 96da2800503d01d_9 | $fill in the blank 96da2800503d01d_10 |
Learning Objective 2.
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.
| Elliot Engines Inc. | |||
| Product Line Budgeted Gross Profit Reports | |||
| For the Year Ended December 31, 20Y2 | |||
| Pistons | Valves | Cams | |
| Revenues | $fill in the blank d3768bff0078053_2 | $fill in the blank d3768bff0078053_3 | $fill in the blank d3768bff0078053_4 |
| Product Costs | |||
| Direct materials | $fill in the blank d3768bff0078053_6 | $fill in the blank d3768bff0078053_7 | $fill in the blank d3768bff0078053_8 |
| Direct labor | fill in the blank d3768bff0078053_10 | fill in the blank d3768bff0078053_11 | fill in the blank d3768bff0078053_12 |
| Factory overhead | fill in the blank d3768bff0078053_14 | fill in the blank d3768bff0078053_15 | fill in the blank d3768bff0078053_16 |
| Total Product Costs | $fill in the blank d3768bff0078053_17 | $fill in the blank d3768bff0078053_18 | $fill in the blank d3768bff0078053_19 |
| Gross profit | $fill in the blank d3768bff0078053_20 | $fill in the blank d3768bff0078053_21 | $fill in the blank d3768bff0078053_22 |
| Gross profit percentage of sales | fill in the blank d3768bff0078053_23% | fill in the blank d3768bff0078053_24% | fill in the blank d3768bff0078053_25% |
d. What does the report in (c) indicate to you?
Valves have the lowest gross profit as a percent of sales. Valves may require a higher price or lower cost to manufacture in order to achieve the same profitability as the other two products.
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