She developed an ABC system very similar to the one used by Kane's chief rival. Part of the reason Johnson developed the ABC system was because Kane'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, the company had used a plantwide overhead rate based on direct labor hours that was developed years ago.

Standard	Deluxe
Parts per wheel. . . . . . . . . . . . . . . . . . . .	4.0	6.0
Setups per 1,000 wheels. . . . . . . . . . . . . . .	20.0	20.0
Finishing direct labor hours per wheel. . . . .	1.0	3.0
Total direct labor hours per wheel. . . . . . . .	2.7	3.8

The company's managers expect to produce 1,000 units of each model during the year.

Activity Cost:

Activity.... Allocation Base........ Allocation Rate

Materials handling. . . .Number of parts.... $4.50 per part

Machine setup. . . . . . .Number of setups.... $325.00 per setup

Insertion of parts. . . . .Number of parts.......$31.00 per part

Finishing. . . . . . . . . . . .Finishing direct labor hours....$51.00 per hour

Requirement 1. Compute the total budgeted manufacturing overhead cost for the upcoming year. (Enter the rates to two decimal places.)

Kane Corporation
Total Budgeted Indirect Manufacturing Costs
	Budgeted Quantity of	Activity Cost	Total Budgeted
Activity	Cost Allocation Base	Allocation Rate	Indirect Cost
Materials handling
Machine setups
Insertion of parts
Finishing
Total budgeted indirect cost

Requirement 2. Compute the manufacturing overhead cost per wheel of each model using ABC. (Round the cost allocation base to three decimals and cost per wheel to the nearest cent.)

Kane Corporation
ABC Indirect Manufacturing Cost per Unit
	Cost	Quantity of Cost Allocation		Allocated Activity
Activity	Allocation Rate	Base Used By:		Cost Per Wheel
		Standard	Deluxe	Standard	Deluxe
Materials handling
Machine setup
Insertion of parts
Finishing
Total ABC allocated indirect cost

Requirement 3. Compute the company's traditional plantwide overhead rate. Use this rate to determine the manufacturing overhead cost per wheel under the traditional system.

Begin by identifying the formula to compute the current plantwide manufacturing overhead rate, then compute the rate. (Round your answer to the nearest cent.)

/

=

Plantwide overhead rate

/

=

per DL hour

Now use the plantwide overhead rate to determine the manufacturing overhead cost per wheel. (Round your answers to the nearest cent.)

		x		=	Manufacturing overhead
Standard		x		=
Deluxe		x		=