Michigan Machining Company (MMC) produces three products—pistons, valves, and cams—for the heavy equipment industry. MMC 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 is as follows:

The estimated direct labor rate is \($24\) per direct labor hour. There are no beginning or ending inventories. The budgeted factory overhead for MMC is \($118,080\).

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 above to construct a budgeted gross profit report by product line.

d. What does the report in (c) indicate to you?

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Budgeted Volume (Units) Direct Labor Price per Direct Materials Hours per Unit Unit Pistons 5,000 0.25 $22.00 Valves 12,000 0.15 12.50 Cams 800 0.80 50.00 per Unit $ 2.50 2.00 10.50