Refer to exercise 4. For 2011, Ericksons managers have decided to use the same indirect manufacturing costs per wheel rim that they computed in 2010. In addition to the unit indirect manufacturing costs, the following data are budgeted for the companys standard and deluxe models for 2011:

Because of limited machine-hour capacity, Erickson can produce either 2,000 standard rims or 2,000 deluxe rims. Requirements

R1. If Ericksons managers rely on the ABC unit cost data computed in 17-16, which model will they produce? Carry each cost to the nearest cent. (All nonmanufacturing costs are the same for both models.)

R2. If the managers rely on the single-allocation-base cost data, which model will they produce?

R3. Which course of action will yield more income for Erickson?

Activity Allocation Base Materials handling Number of parts Machine setup Number of setups Insertion of parts Number of parts Finishing Finishing direct labor hours Cost Allocation Rate 6.00 per part 600.00 per setup 24.00 per part 30.00 per hour