a$.$ Hefel Enterprises produces two different lines of winter jackets, casual and outdoorsman. The

company uses a simple costing system where there is direct material, direct labor, and one

indirect cost pool for overhead. Overhead is allocated based on machine$-$hours and total

production overhead for the year is $$233,000.$ Following is the information related to the

production of the two lines:

Casual Outdoorsman

Units sold $3,2001,800$

Selling price $$125$ $$200$

Direct material cost per unit $$30$ $$45$

Direct manufacturing labor cost per hour $$16$ $$16$

Direct manufacturing labor$-$hours per unit $1\mathrm{.}502\mathrm{.}25$

Production runs $4085$

Material moves $72168$

Machine setups $45155$

Machine$-$hours $5,5004,500$

Number of inspections $250150$

Calculate the cost of a casual jacket and outdoorsman jacket using a simple costing system with

overhead allocated based on machine$-$hours. Calculate the gross profit for each line and evaluate

the level of profitability.

b$.$Given recent concerns regarding the profitability of Hefel Enterprises and its jacket lines, Hefel

has instructed the cost accounting department to begin using an activity$-$based costing system to

see if that has any effect on their product costing decisions. Through this process, total

production overhead was found to be made up of five different cost pools. Following is the

information related to those pools:

Activity Activity Cost Activity Cost Driver

Production scheduling $$95,000$ Production runs

Material handling $$45,000$ Material moves

Machine setup $$25,000$ Machine setups

Assembly $$60,000$ Machine$-$hours

Inspection $ $8,000$ # of Inspections

$$233,000$

Calculate the allocation of overhead to each product line using an activity$-$based costing system.

c$.$ Calculate the gross profit for each product line and evaluate the profitability for each line