ago.

$($Click the icon to view the overhead costs and budgeted data.$)$

Read the requirements.

Requirement $1.$ Compute the gross profit per wheel if managers rely on the ABC unit cost data. $($Enter amounts to two decimal places.$)$

Begin by computing the total manufacturing cost per wheel for each wheel model.

King Corporation

Total cost per unit using ABC data

Total manufacturing cost Deluxe

Now compute the gross profit per wheel for each wheel model.

Data table

$\backslash$table$[[,,,],[\backslash$table$[[$Manufacturing Overhead Costs per Unit:$],[$Standard$]]],[$ABC costs,$$,300\mathrm{.}00$$$,486\mathrm{.}00],[$Plantwide overhead rate,$$,340\mathrm{.}60$$$,445\mathrm{.}40]]$

The following data are budgeted for the company's Standard and Deluxe models for next year:

King Corporation

$\backslash$table$[[$King Corporation$],[$Gross profit per unit using ABC data$],[$Gross profit$]]$

$\backslash$table$[[,$Standard,Deluxe$],[$Sales price per wheel $.......$ $$,450\mathrm{.}00$$$,630\mathrm{.}00],[$Direct materials per wheel $....$ $$,32\mathrm{.}50$$$,46\mathrm{.}75],[$Direct labor per wheel $.......$ $ $$,45\mathrm{.}00$$$,54\mathrm{.}00]]$

Requirement $2.$ Compute the gross profit per wheel if the managers rely on the plantwide allocation cost data

Begin by computing the total manufacturing costs. $($Enter amounts to two decimal places.$)$

King Corporation

Total cost per unit using plantwide overhead rate

Total manufacturing cost Standard

Requirements

Compute the gross profit per wheel if managers rely on the ABC unit cost data.

Compute the gross profit per wheel if the managers rely on the plantwide allocation cost data.

Which product line is more profitable for the company?

Why might the controller have expected ABC to pass the cost$-$benefit test? Were there any warning signs that the company's old direct$-$labor$-$based allocation system was broken?