Manchester's management group is meeting to discuss how to spend the sales and promotion dollars for $201.$ The sales manager

belleves that the market share for the TV board could be expanded by concentrating Manchester's promotional efforts in this area. In

response to thls suggestion, the production manager sald, "Why don't 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 signlficantly larger than the contribution from a TV board. I know we get a

premlum 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.

Varlable manufacturing overhead is applied on the basis of direct$-$labor hours. For $20$x$1,$ varlable overhead is budgeted at $$2,285,000,$

and direct$-$labor hours are estumated at $291,500.$ The hourly rates for machine time and direct labor are $$26$ and $$34,$ respectively. The

company applies a materlal$-$handling charge at $10$ percent of material cost. This materlal$-$handling charge is not included in varlable

manufacturing overhead. Total $20x1$ expenditures for direct materlal are budgeted at $$19,202,000.$

Andrew Fulton, Manchester's controller, believes that before the management group proceeds with the discussion about allocating

sales and promotional dollars to Indlividual products, it might be worthwhile to look at these products on the basis of the activitles

Involved in thelr 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

materlal. The cost drlvers will replace the direct labor, machine time, and overhead costs in the old standard cost figures."

Required:

Identlfy at least four general advantages assoclated with actlvity$-$based costing.

$2$ On the basls of Manchester's unit cost data given In the problem, calculate the total amount that each of the two product Ines will

contribute toward covering fixed costs and profit in $201.$

Using actIvity$-$based costing, calculate the total amount that each of the two product ilnes will contribute toward covering fixed costs

and profit In $201.$