Isaac Engines Inc. produces three products—pistons, valves, andcams—for the heavy equipment industry. Isaac Engines has a verysimple production process and product line and uses a singleplantwide factory overhead rate to allocate overhead to the threeproducts. The factory overhead rate is based on direct labor hours.Information about the three products for 20Y2 is asfollows:
| 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 Enginesis $235,200.
If required, round all per unit answers to the nearestcent.
a. Determine the plantwide factory overheadrate.
$ per dlh
b. Determine the factory overhead and directlabor 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 | $ | $ |
c. Use the information provided to construct abudgeted gross profit report by product line for the year endedDecember 31, 20Y2. Include the gross profit as a percent of salesin the last line of your report, rounded to one decimalplace.
| Isaac Engines Inc. |
| Product Line Budgeted Gross Profit Reports |
| For the Year Ended December 31, 20Y2 |
| Pistons | Valves | Cams |
| $ | $ | $ |
| Product Costs | | | |
| $ | $ | $ |
| | | |
| | | |
| Total Product Costs | $ | $ | $ |
| Gross profit (loss) | $ | $ | $ |
| Gross profit percentage of sales | % | % | % |
d. What does the report in (c) indicate toyou?
Valves have the gross profit as a percent ofsales. Valves may require a priceor cost to manufacture in order to achieve ahigher profitability similar to the other two products.
