Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 Product A Product B $ 436,300 $ 251,700 $200,000 $ 104,000 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: Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Manufacturing Overhead $ 213,500 Product A 90,000 Activity Product B 62,500 Total 152,500 157,500 120,000 117,000 75 300 1 1 375 2 NA NA NA Product design (number of products) Other (organization-sustaining costs) 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 (Do not round your intermediate calculations.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started