Manufacturing Overhead Costs per Unit: ABC costs Standard Deluxe $ 69 258.50 $ 431.50 379.50 Plantwide overhead rate ..... $ 310.50 $ The following data are budgeted for the company's Standard and Deluxe models for next year: Standard Deluxe Sales price per wheel $ 450.00 $ 640.00 Direct materials per wheel.... $ 32.50 $ 47.75 Direct labor per wheel $ FA 45.70 $ 52.50 Several years after reengineering its production process, Kane Corporation hired a new controller, Denise French, She developed an ABC system very similar to the one used by Kane's chief rival. Part of the reason French developed the ABC system was because Kane'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, Kane had used a plantwide overhead rate based on direct labor hours that was developed years 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 dala Begin by computing the total manufacturing cost per wheel for each wheel model Kane Corporation Total cost per unit using ABC data Standard Deluxe Total manufacturing cost Now compute the gross profit per wheel for each wheel model Kane Corporation Gross profit per unit using ABC data Gross profit Standard Deluxe amounts to two decimal places 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.) Kane Corporation Total cost per unit using plantwide overhead rate Standard Deluxe Total manufacturing cost Now compute the gross profit per wheel for each wheel model if the managers rely on the plantwide allocation cost data. (Enter amounts to two decimal places.) Kane Corporation Gross profit per unit using plantwide overhead rate Standard Deluxe Gross profit Gross prot Requirement 3. Which product line is more profitable for the company? Using the new ABC system, the standard model is the deluss model. Actvity-based costing data generally are cost data generated by a plantwide overhead allocation rate. ABC systems hav cost categories (activities), each with its own alocation base, ABC cost assignments represent the cost of resources consumed to manufacture (and support products Requirement 4. 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? The ABC system is likely to pass the cost-beneft test because Kana Corporation manufactures The old cost system appears "broken" because profits have been declining even though the company model is ch with its have exp just as profitable as -benefit te profitable for the company? the deluxe model. Activit assignments efit test? Were th anufactures less profitable than ecause pro ough the company more profitable than ng data generally are represent the cos cost data generated by a plantwide overhe nufacture (and support) products. allocation system was broken? rning signs that the con just as accurate as less accurate than more accurate than Time Gross profit Requirement 3. Which product li Using the new ABC system, the s cost categories (activit might the co tely to pass th less more the same ppears "broke deluxe model. Activity-based costing data generally are C cost assignments st-benefit test? Were represent the cost of re the company's ation manufactures do not accurately even though the comp less accurately more accurately t cti erat identical products that use the same amount of resources ts actur Ver two different products that use different amounts of resources ation es company vity-ba increased marketing efforts re ther mpany raised the selling price of it's products shifted its product mix toward the product that had appeared most profitable under the old system