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Several years after reengineering its production process Biltmore Corporation hired a new controller, Rachael Johnson. She developed an ABC system very similar to the one
Several years after reengineering its production process Biltmore Corporation hired a new controller, Rachael Johnson. She developed an ABC system very similar to the one use by Biltmore's chief rival, West river. Part of the reason Johnson developed ABC system was because Biltmore'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 Biltmore had used a plant wide overhead based on direct labor hours that was developed years ago. For the upcoming year, Biltmore's budgeted ABC manufacturing overhead allocation rates are as follows: the number of parts is now a feasible allocation base because Biltmore recently installed a plant wide computer system. Biltmore produces two wheel models: Standard and Deluxe. Budgeted data for the upcoming year are as follows: the company's managers expect to produce 1,000 units of each model during the year. Compute the total budgeted manufacturing overhead cost for the upcoming year. Compute the manufacturing overhead cost per wheel of each model using ABC. Compute Biltmore's traditional plant wide overhead rate. Use this rate to determine the manufacturing overhead cost per wheel under the traditional system
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