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Several years after reengineering its production process, Zeke Corporation hired a new controller, Tammy English. She developed an ABC system very similar to the one

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Several years after reengineering its production process, Zeke Corporation hired a new controller, Tammy English. She developed an ABC system very similar to the one used by Zeke's chief rival. Part of the reason English developed the ABC system was because Zeke's profits had been dedlining 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, Zeke had used a plantwide overhead rate based on direct labor hours that was developed years ago. rs that was developed years ag Click the icon to view the overhead costs and budgeted data.) Read the reguirements 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. Zeke Corporation Total cost per unit using ABC data Standard Deluxe Direct materials Direct labor Manufacturing overhead Total manufacturing cost 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data. 2. Compute the gross profit per wheel if the managers rely on the plantwide allocation cost data. 3. Which product line is more profitable for the company? 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? Manufacturing Overhead Costs per Unit Standard Deluxe ABC costs Plantwide overhead rate The following data are budgeted for the company's Standard and Deluxe models for next year: Standard Deluxe Sales price per wheel .. . . . .450.00$630.00 34.00 S Direct materials per wheel... 45.60 50.50 Direct labor per wheel

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