Question

Several years after reengineering its production process, Biltmore Corporation hired a new controller, Rachael Johnson. She developed an ABC system very similar to the one used by Biltmore’s chief rival, Westriver. Part of the reason Johnson developed the ABC system was because Biltmore’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, Biltmore had used a plantwide over-head rate based on direct labor hours that was developed years ago. For the upcoming year, Biltmore’s budgeted ABC manufacturing overhead allocation rates are as follows: Activity Allocation



The number of parts is now a feasible allocation base because Biltmore recently installed a plantwide computer system. Biltmore produces two wheel models: Standard and Deluxe. Budgeted data for the upcoming year are as follows: Standard Deluxe



The company’s managers expect to produce 1,000 units of each model during the year.

Requirements
1.Compute the total budgeted manufacturing overhead cost for the upcoming year.
2. Compute the manufacturing overhead cost per wheel of each model using ABC.
3. Compute Biltmore’s traditional plantwide overhead rate. Use this rate to determine the manufacturingoverhead cost per wheel under the traditional system


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  • CreatedAugust 27, 2014
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