1. Assume a company produces and sells only two products14,000 units of Product A and 6,000 units of Product B. The selling prices are $65 per unit for Product A and $96 per unit for Product B. Product As direct materials and direct labor costs per unit are $32 and $12, respectively. Product Bs direct materials and direct labor costs per unit are $34 and $15, respectively. The company 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	30,000	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, what is the product margin for Product A?

A) $54,500

B) $63,500

C) $91,500

D) $127,500

2. Assume a companys activity-based costing system includes three activities with the following activity rates:

Activity Cost Pool	Activity Rate
Travel	$ 2	per mile driven
Deliveries	$ 50	per delivery
Customer service	$ 22	per phone call

Two of the companys many customers include Customer A and Customer B. These two customers consumed the companys activities as follows:

	Total Expected Activity
Customer A	Customer B
Travel (number of miles driven)	300	250
Deliveries (number of deliveries)	15	5
Customer service (number of phone calls)	20	12

If the company earned $1,160 in revenue serving Customer B, then what is the customer margin for this customer?

A) $186

B) $146

C) $126

D) $166