Overhead costs and budgeted data Several years after reengineering its production process, Trudell...
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Overhead costs and budgeted data Several years after reengineering its production process, Trudell Corporation hired a new controller, Christine Erickson. She developed an ABC system very similar to the one used by Trudell's chief rival. Part of the reason Erickson developed the ABC system was because Trudell'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, Trudell had used a plantwide overhead rate based on direct labor hours that was developed years ago. View the overhead costs and budgeted data. Read the requirements. 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data. 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
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Overhead costs and budgeted data Several years after reengineering its production process, Trudell Corporation hired a new controller, Christine Erickson. She developed an ABC system very similar to the one used by Trudell's chief rival. Part of the reason Erickson developed the ABC system was because Trudell'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, Trudell had used a plantwide overhead rate based on direct labor hours that was developed years ago. View the overhead costs and budgeted data. Read the requirements. 1. Compute the gross profit per wheel if managers rely on the ABC unit cost data. 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 