Several years after reengineering its production process, Zippy Corporation hired a new controller, Mandy Miller. She developed an ABC system very similar to the one used by Zippy's

chief rival. Part of the reason Miller developed the ABC system was because Zippy'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, Zippy had used a plantwide overhead rate based on direct labor hours that was developed years ago.

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?

E4-26A (similar to) Question Help Several years atter reengineering its poduction process, Zppy Corporatian hired a new controler, Mandy ler. She developed an ABC system very similar to the one used by Zippys Gial. Part ct the reason Mller developed the ABC system was hecause Zippy's profits had been declining even thcugh the company had shifted its product mix toward the product that had aopeared mos: profitaicle under the old system Before adopting the reN ABC systen, Zippy had used a plantwide ovehead rate based on direct labor hours thai was developed years ago. (Click the icon to view the overhead costs and budgeted data.) Read the requ ements. Requirement 1, Compute th gross profit per whee if managers rely on the ABC u Begin by computing the total manufacturing cost per wheel for each wheel model. Data Table Requirements Manufacturing Overhead Costs per Unit Standard Deluxe S 240.50 41350 S 283.40 S30 1. Compute the gross protit per wheel It managers rely on the ABC unit cos: data. 2. Computs the gross profit perwheel if the managers rely on the plantwice alccstion cost Zippy Corporation ABC costs Plantwide overhead rata The tolowing data are bidgeted tr the ccmpany's Slaiard Total cost per unit using ABC data data. 3. Which product line is more profitable for the company? 4. Why might the ccntrcller have expacted ABC to pass the cost-bene Standard Deluxe ard Deluxe models for nex year test?Were there any warning signs that the ccmpany's ol direct-labor-based allocation system was broken? Standard Deluxe Sales price per whee Direct materials per wheel Direci labor per wheel $430.00 32.50 45.70 S S 1000 46 25 51.00 Print Done Total manufacturing cost Print Done