6. Golden Retriever Company (GR) manufactures three different types of dog-collars, Top-dog, Hot-dog and Econo-dog. The company has traditionally used DL $ to allocate manufacturing overhead (MOH). However, at the beginning of 2015, the controller recommended to the top management that the company should switch over to an activity-based-costing system and provided the following information about the three products to show how different they are along a variety of dimensions.

Top-dog Hot-dog Econo-dog

Direct material per collar $10 $6 $5

Direct labor per collar $5 $5 $5

Production/Sales projections (units) 4,000 10,000 16,000

Number of production runs 4 4 4

Selling price per unit $50 $40 $30

The various activity pools, their respective drivers and the break-up of total budgeted manufacturing overhead of $450,000 in the various pools are given below.

Activity Pool Driver Budgeted MOH $

Direct labor related OH DL $ $90,000

Material related OH Direct Material $ $180,000

Set-up costs Production runs $60,000

Shipping costs Production runs $48,000

Product-related OH Number of distinct products $72,000

Required:

1) Compute the average manufacturing cost and profit margin per unit of the three products under

(a) The old DL $ based-system

(b) The ABC system