Several years after reengineering its production process, Torrent Corp. hired a new controller, Mandy Miller. She developed an ABC system very similar to the one used by Torrent's chief rival, Centreville. Part of the reason Miller developed the ABC system was that Torrent'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, Torrent had used a plantwide overhead rate based on direct labour hours that was developed years ago.

Requirement 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data. Begin by computing the total costs.

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

Requirement 3. Which product line is more profitable for Torrent?

Requirement 4. Why might controller Mandy Miller have expected ABC to pass the cost-benefit test? Were there any warning signs that Torrent's old direct-labour-based allocation system was broken?

X i Data Table $ $ Manufacturing Overhead Costs per Unit Standard Deluxe ABC costs... 280.15$ 433.19 Plantwide overhead rate..... 322.14 $ 391.17 The following data are budgeted for the company's Standard and Deluxe models for next year: Standard Deluxe Sale price per wheel .... .. $ 460.00 $ 630.00 Direct materials per wheel 31.00 48.25 Direct labour per wheel 45.30 50.00 Print Done Requirement 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data. Begin by computing the total costs. Torrent Total cost per unit using ABC data Standard Deluxe Total manufacturing cost Total manufacturing cost Now compute the gross profit. Torrent Gross profit per unit using ABC data Standard Deluxe Gross profit 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. Torrent Total cost per unit using plantwide overhead rate Standard Deluxe Total manufacturing cost Now compute the gross profit per wheel if the managers rely on the plantwide allocation cost data. Now compute the gross profit per wheel if the managers rely on the plantwide allocation cost data. Torrent Gross profit per unit using plantwide overhead rate Standard Deluxe Gross profit Requirement 3. Which product line is more profitable for Torrent? The standard model is the deluxe model. Activity-based costing data generally are cost data generated by a plantwide overhead allocation rate. ABC systems have (activities), each with its own allocation base. ABC cost assignments represent the cost of resources consumed to manufacture and support) products. cost categories Requirement 4. Why might controller Mandy Miller have expected ABC to pass the cost-benefit test? Were there any warning signs that Torrent's old direct-labour-based allocation system was broken? The ABC system is likely to pass the cost-benefit test because Torrent manufactures The old cost system appears "broken" because profits have been declining even though the company