E4-25A Use ABC to allocate manufacturing overhead (Learning Objective 2) its production process, Dettling Corporation hired a ral years after new controller, Alana Metzgar. She developed an ABC system very similar to the one used by Dettling's chief rival. Part of the reason Metzgar developed the ABC system was because Dettling'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, the company had used a plantwide overhead rate based on direct labor hours that was developed years ago. For the upcoming year, Dettling's budgeted ABC manufacturing overhead allocation rates are as follows: Activity Cost Activity Allocation Base Allocation Rate Number of parts Number of setups Number of parts Materials handling .. $4.50 per part $325.00 per setup $31.00 per part Machine setup .. Insertion of parts Finishing direct labor hours 51.00 per hour The number of parts is now a feasible allocation base because Dettling recently installed a plantwide computer system. Dettling produces two wheel models: Standard and Deluxe. Budgeted data for the upcoming year are as follows Standard Deluxe Parts per wheel . Setups per 1,000 wheel Finishing direct labor hours per whee Total direct labor hours per wheel 4.0 20.0 1.0 2.7 6.0 20.0 3.0 3.8 The company's managers expect to produce 1,000 units of each model during the year