Several years after reengineering its production process, Kane Corporation hired

Question

Several years after reengineering its production process, Kane Corporation hired a new controller, Jane Smith, She developed an ABC system very simlar to the one used by Kane's chisf nival. Part of the resson Smith developed the ABC system was because Kane's profts had been dedining een thaugh the company had shittod ito product mix toward tho product that had appoarod moct proftablo unde tho od systom. Boforo adopting tho no ABC gystom Kano nad ucod plant wido o omad rate baGod On dret labor hourg tat was dovo opod yoarago. Cick the icon to view the overhead coets and budgeted data) Read the requirements Requirement 1. Compute the gross profit per wheel maragers rely on the ABC unt cost data. Enter amounts to two decima places.) Begin by computing the tetal manufacturing eost per wheel for euch wheel modl Kane Corporation Total cost per unit using ABC d Deluxe Data Table Manufacturing Overhead Costs per Unit Total manufacturing co Requirements Standard Deluxe $ 30000 486.00 Plantwide overhead rate $ 340.S44540 1. Compute the groes profit per wheel if managers relyonthe ABC uril cot data. 2. Compute the groes profit per whsel it the managers rely on the plantwide alocation eest The fo owing data are budgeted for the compsny's Standard 3. inich product ino ia moro profitab o for the oompany? 4. why might tho controllor have oxpoctad ABC to peas ho costbonoft tost? Waro thoro Deluxe any warning signs that the company's old direct abor-based allocation system was Direct materials per wheel $ 0.00 S 4580 S 52.50 6.75 Print Done Print Done

Explanation / Answer

1. Computation of gross profit as per ABC data

2. Computation of gross profit as per Plantwide allocation rate

3. If it follows ABC analysis then Standard line is profitable

As per Overhead recovery rate Deluxe is more profitable than Standard

Thank You

Particulars Standard Deulxe Direct Material 30 46.75 Direct labour 45.80 52.50 Overheads 300 486 Total Costs 375.80 585.25 Selling price 460 620 Profit 84.20(460-375.80) 34.75(620-585.25)

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