Several years after reengineering its production process, King Corporation hired

Question

Several years after reengineering its production process, King Corporation hired a new controller, Christine Erickson. She developed an ABC system very similar to the one used by King's chief rival. Part of the reason Erickson developed the AB 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. Data Table King Corporation Total cost per unit using ABC data Standard Deluxe Manufacturing Overhead Costs per Unit ABC costs Plantwide overhead rate Standard Deluxe s 371.50 $ 516.50 S 384.80 $ 503.20 The following data are budgeted for the company's Standard and Deluxe models for next yea cost Now compute the gross profit per wheel for each wheel mcdel. King Corporation Gross profit per unit using ABC data Standar Standard Deluxe Sales price per wheel S 575.00 $ 735.00 Direct materials per wheel Direct labor per wheel S 45.90 S 54.00 Deluxe S 33.00 S 46.75 Gross profit Print Done Requirement 2. Compute the gross profit per wheel It the managers rely on the pl

Explanation / Answer

Requirement 1.

Requirement 2.

Total cost per unit using ABC data Particulars Standard Deluxe Direct material per wheel 33.00 46.75 Direct labor per wheel 45.90 54.00 Manufacturing overhead cost per unit 371.50 561.50 Total Manufacturing cost 450.40 662.25

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