Biltmore Corporation hired a new controller, Rachael Johnson She developed an ABC system very similar to the one used by Biltmore's chief rival. Westriver. Part of the reason Johnson developed the ABC system was because Biltmore's profits had been declining even though the company had shifted its product mix toward the product that had appeared most profitable under the old system. Before adopting the new ABC system, Biltmore had used a plantwide overhead rate based on direct labor hours that was developed years ago. For the upcoming year Biltmore's budgeted ABC manufacturing overhead allocation rates are as follows:

The number of parts is now a feasible allocation base because Biltmore recently installed a plant wide computer system Biltmore produces two wheel models Standard and Deluxe Budgeted data for the upcoming year are as follows

The company's managers expect to produce 1000 units of each model during the year
Requirements
1. Compute the total budgeted manufacturing overhead cost for the upcoming year
2. Compute the manufacturing overhead cost per wheel of each model using A8C
3. Compute Biltmores traditional plantwide overhead rate Use this rate to determine the manufacturing overhead cost per wheel under the traditional system.
Determine product profitability
In addition to the manufactunng overhead costs, the following data are budgeted for the company's Standard and Deluxe models for next year
Requirements
1. Compute the gross profit per wheel if managers rely on the ABC unit cost data
2. Compute the gross profit per wheel if the managers rely on the plantwide allocation cost data
3. Which product line is more profitable for Biltmore?
4. Why might the controller have expected ABC to pass the cost-benefit test? Were there any warning signs that Biltmore's old direct-labor-based allocation system was broken?

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Activity Cost Allocation Rate Activity Allocation Base Materials handling Number of parts S3.84 per part Machine setup Number of setups $330.00 per setup Insertion of parts. Number of parts $30.00 per part Finishing direct labor hours Finishing 54.00 per hour Standard |Deluxe Parts per wheel. 8.0 Setups per 1,000 wheels. 20.020.0 1.2 3.3 Total direct labor hours per wheel. 2.0 3.3