Kao Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Kao Engines’ production process uses a single plantwide factory overhead rate based upon direct labor hours to allocate overhead to the three products. The three products for 20Y2 are as follows: Product Budgeted Volume (Units) Direct Labor Hours Per Unit Price Per Unit Selling Price Per Unit Pistons 7,500 0.40 $12 $40 Valves 16,000 0.50 6 75 Cams 4,000 0.20 20 60 The estimated direct labor rate is $25 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Kao Engines is $377,600. Question Content Area If required, round all per unit answers to the nearest cent. a. Determine the plantwide factory overhead rate. fill in the blank 1 of 1$ per dlh b. Determine the factory overhead and direct labor cost per unit for each product. Product Direct Labor Hours Per Unit Factory Overhead Cost Per Unit Direct Labor Cost Per Unit Pistons fill in the blank 1 of 9 dlh fill in the blank 2 of 9$ fill in the blank 3 of 9$ Valves fill in the blank 4 of 9 dlh fill in the blank 5 of 9$ fill in the blank 6 of 9$ Cams fill in the blank 7 of 9 dlh fill in the blank 8 of 9$ fill in the blank 9 of 9$ Question Content Area 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. Kao Engines Inc.Product Line Budgeted Gross Profit ReportsFor the Year Ended December 31, 20Y2 Description Pistons Valves Cams $- Select - $- Select - $- Select - Product Costs $- Select - - Select - - Select - - Select - - Select - - Select - - Select - - Select - - Select - Total product costs $Total product costs $Total product costs $Total product costs Gross profit $Gross profit $Gross profit $Gross profit Gross profit percentage of sales Gross profit percentage of sales% Gross profit percentage of sales% Gross profit percentage of sales%
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Kao Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Kao Engines’ production process uses a single plantwide factory
| Product | Budgeted Volume (Units) |
Direct Labor Hours Per Unit |
Price Per Unit |
Selling Price Per Unit |
|---|---|---|---|---|
| Pistons | 7,500 | 0.40 | $12 | $40 |
| Valves | 16,000 | 0.50 | 6 | 75 |
| Cams | 4,000 | 0.20 | 20 | 60 |
The estimated direct labor rate is $25 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Kao Engines is $377,600.
Question Content Area
If required, round all per unit answers to the nearest cent.
a. Determine the plantwide factory overhead rate.
fill in the blank 1 of 1$ per dlh
b. Determine the factory overhead and direct labor cost per unit for each product.
| Product | Direct Labor Hours Per Unit |
Factory Overhead Cost Per Unit |
Direct Labor Cost Per Unit |
|---|---|---|---|
| Pistons | fill in the blank 1 of 9 dlh | fill in the blank 2 of 9$ | fill in the blank 3 of 9$ |
| Valves | fill in the blank 4 of 9 dlh | fill in the blank 5 of 9$ | fill in the blank 6 of 9$ |
| Cams | fill in the blank 7 of 9 dlh | fill in the blank 8 of 9$ | fill in the blank 9 of 9$ |
Question Content Area
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.
| Description | Pistons | Valves | Cams |
|---|---|---|---|
|
|
$- Select - | $- Select - | $- Select - |
| Product Costs | |||
|
|
$- Select - | - Select - | - Select - |
|
|
- Select - | - Select - | - Select - |
|
|
- Select - | - Select - | - Select - |
| Total product costs | $Total product costs | $Total product costs | $Total product costs |
| Gross profit | $Gross profit | $Gross profit | $Gross profit |
| Gross profit percentage of sales | Gross profit percentage of sales% | Gross profit percentage of sales% | Gross profit percentage of sales% |
Question Content Area
d. What does the report in (c) indicate to you?
Pistons have the fill in the blank 1 of 3
gross profit as a percent of sales. Pistons may require a fill in the blank 2 of 3
price or fill in the blank 3 of 3
cost to manufacture in order to achieve a higher profitability similar to the other two products.
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