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| Stuff. Since inception, Alyssa has used only one manufacturing overhead pool to accumulate costs. Overhead has been allocated to products based on direct labor hours. Until recently, Alyssa was the sole producer of Ruff Stuff and was able to dictate the selling price. However, last year Marvella Products began marketing a comparable product at a price below the standard costs developed by Alyssa. Market share has declined rapidly, and Alyssa must now decide whether to meet the competitive price or to discontinue the product line. Recognizing that discontinuing the product line would place additional burden on its remaining product, Tuff Stuff, Alyssa is using activity-based costing to determine if it would show a different cost structure for the two products. The two major indirect costs for manufacturing the products are power usage and set-up costs. Most of the power usage is used in fabricating, while most of the set-up costs are required in assembly. The set-up costs are predominantly for the Tuff Stuff product line. A decision was made to separate the Manufacturing Department costs into two activity centers: (1) Fabricating using machine hours as the cost driver (activity base), and (2) Assembly using the number of set-ups as the cost driver (activity base).   A. By allocating overhead based on direct labor hours, calculate the 1. total budgeted cost of the Manufacturing Department. 2. unit standard cost of Tuff Stuff. 3. unit standard cost of Ruff Stuff. B. After separation of overhead into activity pools, compute the total budgeted cost of the 1. Fabricating Department. 2. Assembly Department. C. Using activity-based costing, calculate the unit standard costs for 1. Tuff Stuff. 2. Ruff Stuff. D. Discuss how a decision by Alyssa Manufacturing regarding the continued production of Ruff Stuff will be affected by the results of your calculations in Requirement C. |