I Ontario, lnc.. manufactures two products. Standard and Enhanced. and applies overhead on the basis of directlabor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours. respectively. Information about the company's products follows. Standard: Estimated production volume. 3,006 units Direct-material cost, $25 per unit Direct Labor per unit. 3 hours at $12 per hour Enhanced: Estimated production volume, 4,aoa units Directmaterial cost, $43 per unit Direct 'Labor per unit. 4 hours at $12 per hour Ontario's overhead of $800.000 can be Identified with three major activities: order processing {$150000}. machine processing [$560,000], and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Machine Orders Hou rs Ins pect ion Processed Worked Hours Standard 3m 18, ans 2, and Enhanced E 22.8% 3.9m Total 5% 4B. 8% 18, 009 Top management is very concerned about declining protability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new. highly automated machinery was installedmachinery that was expected to produce significant operating efficiencies. Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs ofthe Standard and Enhanced products if the expected manufacturing volume is attained. 2. Assuming use of activitybased costing. compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. 3. Ontario's selling prices are based heavily on cost. a. Ely using direct-labor hours as an application base, which product is overcosted and which product is undercosted'? Calculate the amount of the cost distortion for each prod uct. b. Is it possible that overcosting and undercosting {i.e.. cost distortion} and the subsequent determination of selling prices are contributing to the compa ny's prot woes? Complete this question by entering your answers in the tabs below. Reg 2 Reg 3A Req SB ' Reql Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanoed products if the expected manufacturing volume is attained. .. Tull-.1\". ._-.-..-.'-..'_i-. 1.1-. s $ Assuming use of activitybased costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. Manufacturing cost per unit $ 181 $ 198 By using direct-labor hours as an application base, which product is overdosted and which product is undercosted? Calculate the amount of the cost distortion for each product. per unit Enhanced per un It Is it possible that overcosting and undercosting (i.e., oost distortion) and the subsequent determination of selling prices are contributing to the company's prot woes? Grains-R-Us makes several types of breakfast products. The company currently allocates overhead based on direct material cost and uses normal costing. Budgeted information for 201? is as follows: Overhead costs $2,000,000 Direct labor costs $800,000 Direct labor hours 80,000 Direct material costs $1,600,000 Two of the products that the rm manufactures are cereal and wafes. Information for cereal and wafes is as follows: Cereal Wafes Direct labor costs $200,000 $60,000 Direct labor hours 10,000 5,000 Direct material costs $250,000 $300,000 All actual costs were equal to budgeted costs. a. Which product does the rm allocate more overhead to in 2017? Justify your answer. CHOOSE ONE: CEREAL WAFFLES SAME FOR BOTH b. What is the total cost of Cereal production in 2017? c. The rrn's Waffle manager believes that the amount of overhead allocated to her division is too high and the current activity base is inappropriate. If she wants to minimize the total cost of Wafe production, which activity base should she find most desirable? d. If the firm uses the allocation base you indicated in part (c), would this increase, decrease, or have no effect on the rm's total prot? If there is not enough information to answer this question, explain why not