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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 Product A $ 436,300 $200,000 Product B $ 251,7 ,700 $ 104,000 Manufacturing overhead Cost of goods sold Total $ 688,000 304,000 608,000 $ 1,600,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Manufacturing Overhead Activity Cost Pool (and Activity Measure) Machining (machine-hours) $ 213,500 Product A 90,000 Activity Product B 62,500 Total 152,500 Setups (setup hours) 157,500 75 300 375 Product design (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117,000 ΝΑ ΝΑ ΝΑ Total manufacturing overhead cost $ 608,000 The company's ABC implementation team also concluded that $37,500 and $112,500 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. The company's activity-based costing system would report a product margin for Product A of:

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 Product A $ 436,300 $200,000 Product B $ 251,7 ,700 $ 104,000 Manufacturing overhead Cost of goods sold Total $ 688,000 304,000 608,000 $ 1,600,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Manufacturing Overhead Activity Cost Pool (and Activity Measure) Machining (machine-hours) $ 213,500 Product A 90,000 Activity Product B 62,500 Total 152,500 Setups (setup hours) 157,500 75 300 375 Product design (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117,000 ΝΑ ΝΑ ΝΑ Total manufacturing overhead cost $ 608,000 The company's ABC implementation team also concluded that $37,500 and $112,500 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. The company's activity-based costing system would report a product margin for Product A of:

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 Product A $ 436,300 $200,000 Product B $ 251,7 ,700 $ 104,000 Manufacturing overhead Cost of goods sold Total $ 688,000 304,000 608,000 $ 1,600,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Manufacturing Overhead Activity Cost Pool (and Activity Measure) Machining (machine-hours) $ 213,500 Product A 90,000 Activity Product B 62,500 Total 152,500 Setups (setup hours) 157,500 75 300 375 Product design (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117,000 ΝΑ ΝΑ ΝΑ Total manufacturing overhead cost $ 608,000 The company's ABC implementation team also concluded that $37,500 and $112,500 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. The company's activity-based costing system would report a product margin for Product A of:
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 Product A $ 436,300 $200,000 Product B $ 251,7 ,700 $ 104,000 Manufacturing overhead Cost of goods sold Total $ 688,000 304,000 608,000 $ 1,600,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Manufacturing Overhead Activity Cost Pool (and Activity Measure) Machining (machine-hours) $ 213,500 Product A 90,000 Activity Product B 62,500 Total 152,500 Setups (setup hours) 157,500 75 300 375 Product design (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117,000 ΝΑ ΝΑ ΝΑ Total manufacturing overhead cost $ 608,000 The company's ABC implementation team also concluded that $37,500 and $112,500 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. The company's activity-based costing system would report a product margin for Product A of:
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