Answer to Question #136170 in Management for Inafetse

Question

E4-24A

Refer to your answer in E4-23A. In addition to the manufacturing overhead costs, the following data are budgeted for the company’s Standard and Deluxe models for next year:

Standard Deluxe

Sales price per wheel....$420.00 $620.00

DM per wheel....$34.00 $47.00

DL per wheel…. $45.10 $52.50

1. Compute the gross profit per wheel if managers rely on the ABC unit cost data computed in E4-23A.
2. Compute the gross profit per wheel if the managers rely on the plantwide allocation cost data.
3. Which product line is more profitable for Baltimore?
4. Why might the controller have expected ABC to pass the cost-benefit test? Were there any warning signs that Biltmore’s old direct-labor-based allocation system was broken?

Answer 1

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