Assume a company manufactures only two products14,000 units of Product A and 6,000 units of Product B. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products A and B:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost	Expected Activity
Machining	Machine-hours	$ 300,000	12,000	MH
Machine setups	Number of setups	$ 150,000	200	Setups
Product design	Number of products	$ 78,000	2	Products

Activity Measure	Product A	Product B
Machine-hours	9,000	6,000
Number of setups	50	150
Number of products	1	1

Using the ABC system, how much total overhead cost would be assigned from all of the activities to Product A?

Multiple Choice

• $281,500

• $301,500

• $311,500

• $291,500

Assume that company makes only two products: Product A and Product B. The companys activity-based costing system has allocated $83,250 to an activity called machine setups. It is considering allocating the machine setups cost its products using either the number of setups or setup hours as the activity measure. It gathered the following data with respect to these two potential activity measures:

	Product A	Product B
Number of machine setups	30	45
Number of setup hours per setup	6	6

If the company uses number of setup hours as the activity measure, how much machine setup activity cost would be allocated to Product A?

Multiple Choice

• $41,625

• $30,300

• $42,625

• $33,300

Which of the following statements is true?

Multiple Choice

• Organization-sustaining activity costs should not be allocated to products.

• Organization-sustaining activity costs should be allocated to products using a batch-level activity measure.

• Organization-sustaining activity costs should be allocated to products using a product-level activity measure.

• Organization-sustaining activity costs should be allocated to products using an organization-level activity measure.