Activity-Based Costing, Lean Operations, and the Costs of Quality Use ABC to allocate ranufacturing overhead Several years after reengineering its production process, Enke Corp. hired a new controller, Natalie Babin. She developed an ABC system very similar to the one used by Enke's chief rival, Northstar. Part of the reason Babin developed the ABC system was because Enke'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, the company had used a plantwide overhead rate based on direct labour hours that was developed years ago. For the upcoming year, Enke's budgeted ABC manufacturing overhead allocation rates are as Activity Materials handling Machine setup Insertion of parts Allocation Base Number of parts Number of setups Number of parts Finishing direct labour hours Activity Cost Allocation Rate $ 3.75 per part $ 400.00 per setup $ 24.00 per part 1 Finishing $ 50.00 per hour B The number of parts is now a feasible allocation base because Enke recently purchased bar- 4 coding technology. Enke produces two wheel models: Standard and Deluxe. Budgeted data for the upcoming year are as follows: The number of parts is now a feasible allocation base because Enke recently purchased bar- coding technology. Enke produces two wheel models: Standard and Deluxe. Budgeted data for the upcoming year are as follows: Standard Deluxe Units 1,000 Expected production for each model Parts per wheel Setups per 1,000 wheels Finishing direct labour hours per w] Total direct labour hours per wheel 4.0 15.0 1.0 2.0 6.0 15.0 2.5 3.0 Use the blue shaded areas on the ENTERANSWERS tab for inputs. Alvays use cell references and fornulas where appropriate to receive full credit. Requirenents 1 Compute the total budgeted manufacturing overhead cost for the upcoming year. 2 Compute the manufacturing overhead cost per wheel of each model using ABC. 3 Compute the company's traditional plantwide overhead rate. Use this rate to determine the manufacturing overhead cost per wheel under the traditional system