system very similar to the one used by King's chief rival. Part of the reason Adams developed the ABC system was because King'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, King had used a plantwide overhead rate based on direct labor hours that was

developed years ago.

$($Click the icon to view the overhead costs and budgeted data.$)$

Read the requirements.

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.

King Corporation

Total cost per unit using ABC dataData tableRequirements

Compute the gross profit per wheel if managers rely on the ABC unit cost data.

Compute the gross profit per wheel if the managers rely on the plantwide allocation cost

data.

Which product line is more profitable for the company?

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?