Happy Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. The overhead costs are $64,000 for Equipment depreciation and $4,000 for Supervisory Expense.

The distribution of resource consumption across the activity pools is:

	Machining	Order-filling	Other
Equipment Depreciation	0.50	0.30	0.20
Supervisory Expense	0.10	0.10	0.80

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

	MHs (Machining)	Orders (Order-filling)
Product I6	7,600	600
Product E9	12,400	400

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:	Product I6	Product E9
Sales (total)	$ 182,400	$ 147,800
Direct Material (total)	$ 93,700	$ 46,800
Direct Labor (total)	$ 52,700	$ 65,300

What is the product margin for Product I6 under activity-based costing?

$36,000

$11,928

$2,000

$23,688

.

Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce.

high; considerable

high; little

low; considerable

low; little