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 companys only two products is shown below:

	Product A	Product B	Total
Direct materials	$ 436,300	$ 251,700	$ 688,000
Direct labor	$ 200,000	$ 104,000	304,000
Manufacturing overhead			608,000
Cost of goods sold			$ 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)	Manufacturing Overhead	Activity
		Product A	Product B	Total
Machining (machine-hours)	$ 213,500	81,300	71,200	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	NA	NA	NA
Total manufacturing overhead cost	$ 608,000

The companys ABC implementation team also concluded that $50,000 and $100,000 of the companys 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 companys activity-based costing system would allocate how much manufacturing overhead to Product A?

Multiple Choice

• $205,320

• $210,320

• $200,520

• $203,520

Assume a companys activity-based costing system included three expenses: Vehicle operating expenses, $300,000; Vehicle depreciation, $130,000; and Customer service salaries, $185,000. These costs were consumed by four activities as follows:

	Travel	Deliveries	Customer Service	Other	Total
Vehicle operating expenses	45%	40%	10%	5%	100%
Vehicle depreciation	40%	50%	0%	10%	100%
Customer service salaries	20%	30%	35%	15%	100%

How much total cost (including all three expenses) would be allocated to the Travel activity?

Multiple Choice

• $242,750

• $212,750

• $224,000

• $194,000

Which of the following statements is false?

Multiple Choice

• Budgets enable each department to function independently from other departments.

• Budgets force managers to think about and plan for the future.

• Budgets communicate managements plans throughout the organization.

• Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.