Healthy Hound, Inc., makes two lines of dog food: (1) Basic Chunks, and (2) Custom Cuts. The Basic Chunks line is a dry food that is processed almost entirely by an automated process. Custom Cuts is a canned food made with real horsemeat. The slabs of meat are cut and trimmed by hand before being shoveled into a automated canning machine. Basic Chunks sells very well and is priced significantly below competitive brands. Sales of Custom Cuts have been on the decline, as the company has failed to keep the brand price competitive. Other information concerning each product line is provided below.

	Basic Chunks			Custom Cuts
Number of units* produced and sold per month		50,000			20,000
Direct materials cost per unit	$	2		$	4
Direct labor cost per hour	$	12		$	12
Direct labor hours per unit		0.01			0.10

*Units for Basic Chunks refer to bags; units for Custom Cuts refer to cases.

The company currently allocates manufacturing overhead to each product line on the basis of direct labor hours. Budgeted manufacturing overhead per month is $24,600, whereas budgeted direct labor hours amount to 2,500 per month.

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 cost drivers be used:

Cost Pool	Amount Allocated		Cost Driver	Total Driver Volume
Utilities	$	8,000	Kilowatt-hours	100,000	kWh
Maintenance		1,000	Machine-hours	200	mh
Depreciation of plant and equipment		15,000	Square feet occupied	80,000	sq. ft.
Miscellaneous		600	Direct labor hours	2,500	DLH
Total allocation	$	24,600

The amount of driver activity corresponding to each product line is as follows:

Cost Driver	Basic Chunks		Custom Cuts
Kilowatt-hours	90,000	kWh	10,000	kWh
Machine-hours	160	mh	40	mh
Square feet occupied	60,000	sq. ft	20,000	sq. ft.
Direct labor hours	500	DLH	2,000	DLH