In its first year of ons a di a ser and 17,500 units of Product B at a selling price of $40 per unit. Additional information relating to the company's only two products is shown below: Direct materials Direct labor Manufacturing overhead Cost of goods sold Product A $436,300 $200,000 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product design (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Product B $251,700 $104,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Multiple Choice $519,000 Manufacturing Overhead Total 688,000 304,000 608,000 $1,600,000 $213,500 157,500 120,000 117,000 $608,000 $ Product A Product B 90,000 62,500 75 300 1 NA 1 Activity ΝΑ The company's ABC implementation team also concluded that $50,000 and $100,000 of the company's advertising expenses could be directly traced to Product A and Product B, respectively. The remainder of its selling and administrative expenses ($402,000) was organization-sustaining in nature. How much of the company's total costs that would be included in its traditional absorption costing income statement should not be assigned to Product A or Product B by the activity-based costing system that the company uses for internal management purposes? Total 152,500 375 2 NA
In its first year of ons a di a ser and 17,500 units of Product B at a selling price of $40 per unit. Additional information relating to the company's only two products is shown below: Direct materials Direct labor Manufacturing overhead Cost of goods sold Product A $436,300 $200,000 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product design (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Product B $251,700 $104,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Multiple Choice $519,000 Manufacturing Overhead Total 688,000 304,000 608,000 $1,600,000 $213,500 157,500 120,000 117,000 $608,000 $ Product A Product B 90,000 62,500 75 300 1 NA 1 Activity ΝΑ The company's ABC implementation team also concluded that $50,000 and $100,000 of the company's advertising expenses could be directly traced to Product A and Product B, respectively. The remainder of its selling and administrative expenses ($402,000) was organization-sustaining in nature. How much of the company's total costs that would be included in its traditional absorption costing income statement should not be assigned to Product A or Product B by the activity-based costing system that the company uses for internal management purposes? Total 152,500 375 2 NA
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:In its first year of operations a company produced and sold 70,000 units of Product A at a selling price of $20 per unit
and 17,500 units of Product B at a selling price of $40 per unit. Additional information relating to the company's only two
products is shown below:
Direct materials
Direct labor
Manufacturing overhead
Cost of goods sold
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product design (number of products)
Other (organization-sustaining costs)
Total manufacturing overhead cost
The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities
as follows:
Product A Product B
$436,300
$251,700
$200,000
$104,000
Multiple Choice
$519,000
$117,000
Total
688,000
304,000
608,000
$1,600,000
Manufacturing
Overhead
$213,500
157,500
120,000
117,000
$608,000
$402,000
$
Activity
Product A Product B
90,000
75
1
ΝΑ
The company's ABC implementation team also concluded that $50,000 and $100,000 of the company's advertising
expenses could be directly traced to Product A and Product B, respectively. The remainder of its selling and
administrative expenses ($402,000) was organization-sustaining in nature.
Total
62,500 152,500
How much of the company's total costs that would be included in its traditional absorption costing income statement
should not be assigned to Product A or Product B by the activity-based costing system that the company uses for
internal management purposes?
300
1
NA
375
2
NA
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