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:

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.
a. Determine the plantwide factory overhead rate.
b. Determine the factory overhead and direct labor cost per unit for each product.
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.
d. What does the report in (c) indicate to you?

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Pistons Valves Cams Budgeted Volume (Units) 7,500 16,000 4,000 Direct Labor Hours per Unit 0.40 0.50 0.20 Direct Materials per Unit $12 6 20 Selling Price per Unit $40 75 60