Manchester Technology, Inc. manufactures several different types of printed circuit boards; however, two of the boards account for the majority of the companys sales. The first of these boards, a television circuit board, has been a standard in the industry for several years. The market for this type of board is competitive and price-sensitive. Manchester plans to sell 85,000 of the TV boards in 20x1 at a price of $510 per unit. The second high-volume product, a personal computer circuit board, is a recent addition to Manchesters product line. Because the PC board incorporates the latest technology, it can be sold at a premium price. The 20x1 plans include the sale of 60,000 PC boards at $855 per unit. Manchesters management group is meeting to discuss how to spend the sales and promotion dollars for 20x1. The sales manager believes that the market share for the TV board could be expanded by concentrating Manchesters promotional efforts in this area. In response to this suggestion, the production manager said, Why dont you go after a bigger market for the PC board? The cost sheets that I get show that the contribution from a PC board is significantly larger than the contribution from a TV board. I know we get a premium price for the PC board. Selling it should help overall profitability. The cost-accounting system shows that the following costs apply to the PC and TV boards. PC Board TV Board Direct material $ 249 $ 159 Direct labor 4.0 hr. 1.5 hr. Machine time 1.5 hr. 1.5 hr. Variable manufacturing overhead is applied on the basis of direct-labor hours. For 20x1, variable overhead is budgeted at $2,540,000, and direct-labor hours are estimated at 385,875. The hourly rates for machine time and direct labor are $38 and $46, respectively. The company applies a material-handling charge at 10 percent of material cost. This material-handling charge is not included in variable manufacturing overhead. Total 20x1 expenditures for direct material are budgeted at $28,455,000. Andrew Fulton, Manchesters controller, believes that before the management group proceeds with the discussion about allocating sales and promotional dollars to individual products, it might be worthwhile to look at these products on the basis of the activities involved in their production. Fulton has prepared the following schedule to help the management group understand this concept. Using this information, Fulton explained, we can calculate an activity-based cost for each TV board and each PC board and then compare it to the standard cost we have been using. The only cost that remains the same for both cost methods is the cost of direct material. The cost drivers will replace the direct labor, machine time, and overhead costs in the old standard cost figures. Budgeted Cost Cost Driver Budgeted Annual Activity for Cost Driver Procurement $ 1,000,000 Number of parts 10,090,500 parts Production scheduling 540,000 Number of boards 152,250 boards Packaging and shipping 1,080,000 Number of boards 152,250 boards Total $ 2,620,000 Machine setup $ 972,000 Number of setups 367,500 setups Hazardous waste disposal 136,000 Pounds of waste 28,770 pounds Quality control 1,240,000 Number of inspections 519,750 inspections General supplies 192,000 Number of boards 152,250 boards Total $ 2,540,000 Machine insertion $ 3,400,000 Number of parts 7,032,000 parts Manual insertion 10,000,000 Number of parts 2,939,000 parts Wave-soldering 364,000 Number of boards 152,250 boards Total $ 13,764,000 Required per Unit PC Board TV Board Parts: 95 46 Machine insertions 56 45 Manual insertions 39 1 Machine setups 3 2 Hazardous waste disposal, in lb. .40 .04 Inspections 4 3 Required: 1. Identify at least four general advantages associated with activity-based costing. 2. On the basis of Manchesters unit cost data given in the problem, calculate the total amount that each of the two product lines will contribute toward covering fixed costs and profit in 20x1. 3. Using activity-based costing, calculate the total amount that each of the two product lines will contribute toward covering fixed costs and profit in 20x1.