Question

6 of 7 (5 complete) HW Score: 36.61%, 7.32 of 2 Score: 0 of 3 pts E4-28A (similar to) Question Help Several years after reengineering its production process, Zeke Corporation hired a new controller, Alice Brown. She developed an ABC system very similar to the one used by Zeke's chief rival. Part of the reason Brown developed the ABC system was because Zeke'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 Zeke 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 Data Table Requirement. 1. Compute the gross profit per Wheel managers rely on the ABC unit cost dito. (Enter amounts Begin by computing the total manufacturing cost per wheel for each wheel model Manufacturing Overhead Costs per Unit Zeka Corporation Standard Deluxe Total cost per unit using ABC data ABC costs 258.50 S 13150 Standard Deluxe Plantwide overhead rate $ 310.505 37950 Direct mails 30.00 46.75 The following data are budgeted for the company's standard Drew 51.50 and Dale models for new year Standard Marwading over Deluxe Bales price par wheel... 420.00 00000 Total marwurg com Die materials per what 30.00 Rocurements Direct lahar por wheel 45.80 5 ST Print Done Come ons roer whanagers rely on the ABC na costa 2. Computer or where managers rely on the part de coco 2. Where to come! 4. Who webu? Were there any wwing women's borbosediensystem was 33

Answer 1

a)
Zeke Corporations
Total cost per unit using ABC Data
	Standard	Deluxe
Direct materials	$       30.00	$       46.75
Direct labor	$       45.80	$       51.50
Manufacturing overhead	$     256.50	$     431.50
Total manufacturing cost	$     332.30	$     529.75
Zeke Corporations
Gross profit per unit using ABC data
	Standard	Deluxe
Sales price	$     420.00	$     600.00
Total manufacturing costs	$     332.30	$     529.75
Gross profit	$       87.70	$       70.25
b)
Zeke Corporations
Total cost per unit using plantwide overhead rate
	Standard	Deluxe
Direct materials	$       30.00	$       46.75
Direct labor	$       45.80	$       51.50
Manufacturing overhead	$     310.50	$     379.50
Total manufacturing cost	$     386.30	$     477.75
Zeke Corporations
Gross profit per unit using plantwide overhead rate
	Standard	Deluxe
Sales price	$     420.00	$     600.00
Total manufacturing costs	$     386.30	$     477.75
Gross profit	$       33.70	$     122.25
c)
The standard model is more profitable than the deluxe model under ABC Data while the deluxe model is more profitable than the standard model under  plantwide overhead rate
Activity-based costing data generally are more accurate than cost data generated by a plant-wide overhead allocation rate. ABC systems have more cost categories (activities), each with its own allocation base. ABC cost assignments more accurately represent the cost of resources consumed to manufacture (and support) products
d)
The ABC system is likely to pass the cost-benefit test because Zeke Corporation manufactures two different products that use different amounts of resources.The old cost system appears “broken” because profits have been declining even though the company shifted its product mix toward the product that had appear more profitable under the old system.