Question
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $59,000 and $103,000 of
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $59,000 and $103,000 of the companys advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the companys manufacturing overhead to four activities as shown below:
Activity Cost Pool (and Activity Measure)Manufacturing OverheadActivityB300T500TotalMachining (machine-hours)$ 201,69690,20062,600152,800Setups (setup hours)133,32073230303Product-sustaining (number of products)101,000112Other (organization-sustaining costs)60,400NANANATotal manufacturing overhead cost$ 496,4163. Prepare a quantitative comparison of the traditional and activity-based cost assignments.
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