question 17-8b

ROBLEM 17.8B C versus Use of a gle Activity Base Estimated so Estimated Production Runs Feet of Prod Space Product 500 Boots 15,000 300 Poles 200 Helmets Instructions allocated to each a. Calculate the amount of Maintenance Department costs that would be base. uct ne (on a per-unit basis) using machine-hours as a single activity b. Calculate the amount of Maintenance Department costs that would be allocated product line (on a per-unit basis) the proposed ABC system cost currently being distorted using machine-hours as a single activity Defend your answer Happy Cat, Inc., makes two lines of cat food: (1) Tabby Treat, and (2) Fresh n' Fis The Tabby Treat ne is a dry food that processed almost entirely by an automated process. Fresh n Fishy is a canned food made with real carp from the Mississippi River. Each carp is filleted by hand before being tossed into an automated grinding and canning machine. Tabby Treat sells on the deci priced significantly below competitive brands. Sales of Fresh n' Fishy have been brand price competitive. Other information concerning each product line is provided below Tabby Fresh n' Treat Fishy 75,000 48,000 Number of units produced and sold per month Direct materials cost per unit $16 $16 Direct labor cost per hour 0.04 0.25 Direct labor hours per unit units for Tabby Treat refer to bags. Units for Fresh n' Fishy refer to cases. The company currently allocates manufacturing overhead each produc ne on the basis ol labor hours. Budgeted manufacturing overhead per month is $60,000. whereas b direct labor hours amount to 15,000 per month s cost accounting system. The consultan Cat recently consultant recommends that the company adopt activity-based costing to allocate manufacturing overh He proposes that the following cost pools and cost drivers be used Total Driver Amount Volume Cost Pool Allocated Cost Driver 250,000 kWh $26,000 Kilowatt-hours Utilities 100 set-ups 19,000 Machine set-ups Maintenance 12,000 square feet occupied 50,000 sq. ft. Depreciation of plant and equipment 15,000 DLH 3,000 Direct labor hours Miscellaneou $60,000 Total allocation The amount of driver activity corresponding to each product ne is as follows Tabby Treat Fresh n Fishy Cost Driver 200,000 kWh 50,000 kWh Kilowatt-hours 30 mh 70 mh Machine set-ups 42,000 sq. ft 8,000 sq Square feet occupied 3,000 DLH 2,000 DL Direct labor hours