Exercise 1 (20 points) Healthy Hound, Inc., makes two lines of dog food: (1) Basic Chunks, and (2) Custom Cuts. Information concerning each product line is provided below. Basic Chunks Custom Cuts Number of units produced 60000 30000 Direct materials cost per unit 0.60 0.12 1.00 0.30 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 34,600, whereas budgeted direct labor hours amount to 2,900. 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: Cost pool Amount Activity base Utilities 8,000 Kilowatt-hours (kWh) Maintenance 1,000 Machine-hours Depreciation of plant Miscellaneous 25,000 Square feet occupied 600 Direct labor hours The amount of activity corresponding to each product line is as follows: Activity base Basic Chunks Custom Cuts Kilowatt-hours (kWh) Machine hours 90000 160 20000 40 Square feet occupied 60000 20000 500 2400 Direct labor hours 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.