Empire Company manufactures wheel rims. The controller budgeted ABC allocation rates for 2024. Empire produces two wheel rim models: standard and deluxe. Budgeted data for 2024 are as follows: 5 Click the icon to view the 2024 allocation rates and budgeted data.) F: (Click the icon to view additional information, budgeted information and the deluxe unit cost calculation.) Controller Matthew Barnhill is surprised by the increase in cost of the deluxe model under ABC. He had market research study conducted. (Click the icon to view the results of the market research.) Would implementing the value engineering recommendation enable Empire to achieve its target cost for the deluxe rim? Begin by selecting the formula to allocate overhead (OH) costs. Then enter the amounts to calculate the revised finishing activity cost per rim. Data Table = Allocated mfg. overhead costs In 2025, Empire's managers used the same indirect manufacturing costs per wheel rim that they computed in 2024 using activity-based costing. 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 More Info Standard Deluxe Predetermined Overhead Allocation Rate $ Activity Allocation Base Sales price Direct materials 900.00 $ 1,180.00 35.00 51.00 45.00 53.00 Number of parts Direct labor Market research shows that for the deluxe rim to provide a reasonable profit. Empire will have o meet a target manufacturing cost of 497.00 per rim. A value engineering study by Empire's employees suggests that modifications to the finishing process could cut finishing cost from $40.00 to $30.00 per hour and reduce the finishing direct labor hours per deluxe rim from 6.5 hours to 6.0 hours. Direct materials would remain unchanged at $51.00 per rim, as would direct labor at $53.00 per rim. The materials handling, machine setup, and insertion of parts activity costs also would remain the same. Materials handling Machine setup Insertion of parts Finishing Number of setups Number of parts Number of finishing hours $2.00 per part 900.00 per setup 26.00 per part 40.00 per hour Allocated activity Quantity of allocation Predetermined overhead allocation cost per rim base used rate (Deluxe) Deluxe Standard 4.0 5.0 X $ 2.00 = $ 10.00 5.0 Print Done ABC cost per unit: Materials handling Machine setups Insertion of parts Finishing direct labor hours 0.026 $ 13.0 Parts per rim Setups per 500 rims Finishing hours per rim Total direct labor hours per rim 13.0 900.00 = 26.00 = 5.0 x $ 23.40 130.00 260.00 5.0 6.5 6.5 * $ 40.00 = 6.0 7.0 $ 423.40 Total Print Done Print Done Choose from any list or enter any number in the input fields and then click Check
