Several years after reengineering its production process, Burke Corporation hire

Question

Several years after reengineering its production process, Burke Corporation hired a new controller, Alice Brown. She developed an ABC system very similar to the one used by Burke's chief rival, Hotbeach. Part of the reason Brown developed the ABC system was because Burke'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, Burke 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. Data Table Burke Corporation Total cost per unit using ABC data Standard Deluxe Manufacturing Overhead Costs per Unit Direct materials Direct labor Manufacturing overhead Total manufacturing cost 33.50 $ 46.25 Standard $ 240.50 $ 413.50 $ 283.40 370.60 45.00 52.00 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 Direct materials per wheel Direct labor per wheel $470.00 $ 650.00 46.25 52.00 33.50 $ 45.00 $ PrintDone

Explanation / Answer

Computation of Gross Profit using ABC unit Cost Data Standard   Deluxe Selling Price $          470.00 $ 650.00 Direct Cost Direct Material $            33.50 $    46.25 Direct Labour $            45.00 $    52.00 Manufacturing Overhead $          240.50 $ 413.50 Total Manufacturing Cost $          319.00 $ 511.75 Gross Profit $          151.00 $ 138.25 [Sales-Manufacturing Cost]

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