For reference to E4-27A, the information was:

E4-28A. Continuation of E4-27A: Determine product profitability (Learning Objectives 2 & 3) Refer to your answers in E4-27A. 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 $460.00 $630.00 Sales price per wheel...... Direct materials per wheel Direct labor per wheel $ 33.50 $ 45.70 $ 48.00 $ 52.00 Requirements 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data computed in E4-27A. 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 the company? 4. Why might the controller have expected ABC to pass the cost- benefit test? Were there any warning signs that the company's old direct-labor-based allocation system was broken? (1) No of No of Activity Activity required for required for Standard (A) Deluxe (B) Total No of Activity (C) = (A+B) Activity Rate (D) Total Cost (C) x (D) Activity (1000 * 4) (1000 * 6) =4000 parts =6000 parts Materials handling 10000 $ 4.50 $ 45,000 Machine setup 20 20 40 $ 325$ 13,000 (1000 * 4) (1000 * 6) =4000 parts =6000 parts Insertion of parts 10000 31 $ 3,10,000 (1000 * 1) (1000 * 3) =1000 hours =3000 hours Finishing 4000 $ $ 51 $ 2,04,000 $ 5,72,000 (2) Standard Deluxe Materials handling ($4.5 * 4 parts) $ 18.00 ($4.5 * 6 parts) $ 27.00 Machine setup ($325 * 20 setup)/1000 wheel $ 6.50 ($325 * 20)/1000 $ 6.50 Insertion of parts ($31 * 4 parts) $ 124.00 ($31 * 6 parts) $ 186.00 Finishing ($51 * 1) $ 51.00 ($51 * 3) $ 153.00 Manufacturing overhead cost per wheel $ 199.50 $ 372.50 (3) Plantwide overhead rate Total overhead $5,72,000 Total number of parts 10000 $ 57.20 Total no of parts = (1000 * 4) + (1000 * 6) = 10000 Total no of parts = (1000 * 4) + (1000 * 6) = 10000 Standard Deluxe Parts per wheel 4 6 X Plantwide overhead rate $ 57.20 $ 57.20 Manufacturing overhead cost per wheel $ 228.80 $ 343.20