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: Multiple Choice O Product A $ 436,300 $ 200,000 $637,000 $400,000 Product B $ 251,700 $ 104,000 $517,000 Total $ 688,000 304,000 608,000 $ 1,600,000 $117,000 Manufacturing Overhead $ 213,500 157,500 120,000 117,000 $ 608,000 Product A 90,000 75 1 ΝΑ Activity Product B 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 ($400,000) was organization-sustaining in nature. 62,500 300 1 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? ΝΑ Total 152,500 375 2 ΝΑ
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: Multiple Choice O Product A $ 436,300 $ 200,000 $637,000 $400,000 Product B $ 251,700 $ 104,000 $517,000 Total $ 688,000 304,000 608,000 $ 1,600,000 $117,000 Manufacturing Overhead $ 213,500 157,500 120,000 117,000 $ 608,000 Product A 90,000 75 1 ΝΑ Activity Product B 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 ($400,000) was organization-sustaining in nature. 62,500 300 1 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? ΝΑ Total 152,500 375 2 ΝΑ
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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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:
Multiple Choice
O
Product A
$ 436,300
$ 200,000
$637,000
$400,000
Product B
$ 251,700
$ 104,000
$517,000
Total
$ 688,000
304,000
608,000
$ 1,600,000
$117,000
Manufacturing
Overhead
$ 213,500
157,500
120,000
117,000
$ 608,000
Product A
90,000
75
1
ΝΑ
Activity
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
($400,000) was organization-sustaining in nature.
Product B
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?
62,500
300
1
ΝΑ
Total
152,500
375
2
ΝΑ
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