Several years after reengineering its production process, Trudell Corporation hired a new controller, Alice Brown. She developed an ABC system very similar to the one used by Trudell's chief rival. Part of the reason Brown developed the ABC system was because Trudell'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, Trudell had used a plantwide overhead rate based on direct labor hours that was developed years ago.

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i Data Table Manufacturing Overhead Costs per Unit Standard Deluxe ABC costs ................. $ 240.50 $ 413.50 Plantwide.overhead rate ...... $ 283.40 $ 370.60 The following data are budgeted for the company's Standard and Deluxe models for next year: Standard Deluxe Sales.price per wheel ...... $ ...... 490.00 $ 32.50 $ 680.00 46.25 Direct materials.per. wheel ...... Direct labor per.wheel. ........ $ 45.20 $ 52.50 Requirement 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data. (Enter amounts to two decimal places.) Begin by computing the total manufacturing cost per wheel for each wheel model. Trudell Corporation Total cost per unit using ABC data Standard Deluxe Total manufacturing cost Now compute the gross profit per wheel for each wheel model. Trudell Corporation 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. (Enter amounts to two decimal places.) Trudell 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.) Trudell Corporation Gross profit per unit using plantwide overhead rate Standard Deluxe Gross profit Requirement 3. Which product line is more profitable for the company? cost data generated by a plantwide overhead allocation rate. ABC systems have cost categories (activities), each with its own allocation base. ABC cost assignments represent the cost of The standard model is V the deluxe model. Activity-based costing data generally are 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-benefit test because Trudell Corporation manufactures The old cost system appears "broken" because profits have been declining even though the company || Trudell Corporation Total cost per unit using ABC data Standard Deluxe Administrative costs Delivery costs Direct labor Direct materials r wheel for each wheel model. Manufacturing overhead Selling expenses Trudell Corporation Gross profit ner unit usina ABC data Requirement 3. Which product line is more profitable The standard model is the del resources consumed to Requirement 4. Why n just as profitable as less profitable than The ABC system is likel more profitable than Activity-based costing data generally are V cost dai pass the cost-benefit test? Were there an just as accurate as less accurate than udell Corporation manufactures more accurate than declining even though the comnanyl he cost-benefit test? Were there any warning signs that the company's old direct-labor-based allocation system was broken? Corporation manufactures ning even though the comp identical products that use the same amount of resources two different products that use different amounts of resources en continue to the next qu . Listente - . - 1 . 1 I.. . - . 1 . . .... 1... cy-based costing data generally 2- ....... ... .... ---t. . A ...-t. cost increased marketing efforts the cost-benefit test? Were there raised the selling price of it's products Corporation manufactures shifted its product mix toward the product that had appeared most profitable under the old system ining even though the company