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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

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...
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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
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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