Healthy Hound, Inc., makes two lines of dog food: (1) Basic Chunks, and (2) Custom Cuts....

 

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Healthy Hound, Inc., makes two lines of dog food: (1) Basic Chunks, and (2) Custom Cuts. Information concerning each product line is provided below. Number of units produced Direct materials cost per unit Direct labor cost per unit The company currently allocates manufacturing overhead to each product line on the basis of direct labor hours. Budgeted manufacturing overhead is 24,600€, whereas budgeted direct labor hours amount to 2,500. Cost pool Utilities Healthy Hound recently hired a consultant to examine its cost accounting system. The consultant recommends that the company adopt activity-based costing to allocate manufacturing overhead. She proposes that the following cost pools and activity bases be used: Maintenance Depreciation of plant Miscellaneous Basic Chunks 50000 0.50 € 0.12 € Activity base Kilowatt-hours (kWh) Machine hours Square feet occupied Direct labor hours. Amount 8,000€ 1,000 € 15,000 € Square feet occupied 600 € Direct labor hours The amount of activity corresponding to each product line is as follows: Custom Cuts 20000 1.00 € 1.20 € Activity base Kilowatt-hours (kWh) Machine-hours Basic Chunks 90000 160 60000 500 Custom Cuts 10000 40 20000 2000 a. Compute the allocated manufacturing overhead to each product line using direct labor hours as a single activity base. b. Compute the allocated manufacturing overhead to each product line using the activity-based costing approach recommended by the consultant. c. Compute the total manufacturing costs assigned to each product line when activity-based costing is used to allocate manufacturing overhead. Healthy Hound, Inc., makes two lines of dog food: (1) Basic Chunks, and (2) Custom Cuts. Information concerning each product line is provided below. Number of units produced Direct materials cost per unit Direct labor cost per unit The company currently allocates manufacturing overhead to each product line on the basis of direct labor hours. Budgeted manufacturing overhead is 24,600€, whereas budgeted direct labor hours amount to 2,500. Cost pool Utilities Healthy Hound recently hired a consultant to examine its cost accounting system. The consultant recommends that the company adopt activity-based costing to allocate manufacturing overhead. She proposes that the following cost pools and activity bases be used: Maintenance Depreciation of plant Miscellaneous Basic Chunks 50000 0.50 € 0.12 € Activity base Kilowatt-hours (kWh) Machine hours Square feet occupied Direct labor hours. Amount 8,000€ 1,000 € 15,000 € Square feet occupied 600 € Direct labor hours The amount of activity corresponding to each product line is as follows: Custom Cuts 20000 1.00 € 1.20 € Activity base Kilowatt-hours (kWh) Machine-hours Basic Chunks 90000 160 60000 500 Custom Cuts 10000 40 20000 2000 a. Compute the allocated manufacturing overhead to each product line using direct labor hours as a single activity base. b. Compute the allocated manufacturing overhead to each product line using the activity-based costing approach recommended by the consultant. c. Compute the total manufacturing costs assigned to each product line when activity-based costing is used to allocate manufacturing overhead.