Isaac Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Isaac 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 UnitPrice per UnitDirect Materials per UnitPistons6,0000.30$40$ 9Valves13,0000.50215Cams1,0000.105520The 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 Engines is $235,200.Determine the plantwide factory overhead rate.Determine the factory overhead and direct labor cost per unit for each product.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.

Name: Isaac Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Isaac Engines has a very simple production process and product line and uses…
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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4E: Isaac Engines Inc. produces three productspistons, valves, and camsfor the heavy equipment industry....

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Isaac Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Isaac 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	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 Engines is $235,200.

Determine the plantwide factory overhead rate.
Determine the factory overhead and direct labor cost per unit for each product.
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.

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