Company manufactures wheel rims. The company produces two wheel rim models: standard and deluxe. For 2025, Edmund's managers have decided to use the same indirect manufacturing costs per wheel rim that they computed in 2024 using activity-based costing.

Data table

Indirect Manufacturing Cost Per Unit
	Standard	Deluxe
ABC costs	$158.20	$388.20
Single-rate costs	$204.90	$341.50

2024 indirect manufacturing costs per wheel rim.)

Question content area top right

Part 1

In addition to the unit indirect manufacturing costs, the following data are expected for the company's standard and deluxe models for 2025:

Data table

	Standard	Deluxe
Sales price	$800.00	$1,040.00
Direct materials	31.00	47.00
Direct labor	45.00	54.00

Because of limited machine hour capacity, Edmund can produce either 2,000 standard rims or 2,000 deluxe rims.

Requirements

1.	If Edmund's managers rely on the ABC unit cost data computed in 2024, which model will they produce? Carry each cost to the nearest cent. (Ignore selling and administrative expenses for this calculation.)
2.	If the managers rely on the single plantwide overhead allocation rate cost data, which model will they produce?
3.	Which course of action will yield more income for Edmund?

Question content area bottom

Part 1

Requirement 1. If Edmund's managers rely on the ABC unit cost data computed in 2024, which model will they produce? Carry each cost to the nearest cent. (Ignore selling and administrative expenses for this calculation.)

Use the ABC unit cost data to compute the gross profit per unit for each model.

ABC Data Gross Profits
	Standard	Deluxe
Sales price
Direct materials
Direct labor
Indirect manufacturing costs
Gross profit per unit