In its first year of operations a company produced and sold 70,000 units of Product A...

 

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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: Product A Direct materials Direct labor Product B $ 436,300 $ 251,700 $200,000 $ 104,000 Manufacturing overhead Total $ 688,000 304,000 608,000 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 Machining (machine-hours) Setups (setup hours) Product design (number of products) $ 213,500 157,500 120,000 Product A 90,000 Activity Product B 62,500 Total 152,500 75 300 1 1 375 2 Other (organization-sustaining costs) 117,000 NA NA NA Total manufacturing overhead cost $ 608,000 The company's ABC implementation team also concluded that $50,000 and $100,000 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 ($401,300) was organization-sustaining in nature. How much of the company's total costs that would be included in its traditional absorption costing income statement should not be assigned to Product A or Product B by the activity-based costing system that the company uses for internal management purposes? 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: Product A Direct materials Direct labor Product B $ 436,300 $ 251,700 $200,000 $ 104,000 Manufacturing overhead Total $ 688,000 304,000 608,000 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 Machining (machine-hours) Setups (setup hours) Product design (number of products) $ 213,500 157,500 120,000 Product A 90,000 Activity Product B 62,500 Total 152,500 75 300 1 1 375 2 Other (organization-sustaining costs) 117,000 NA NA NA Total manufacturing overhead cost $ 608,000 The company's ABC implementation team also concluded that $50,000 and $100,000 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 ($401,300) was organization-sustaining in nature. How much of the company's total costs that would be included in its traditional absorption costing income statement should not be assigned to Product A or Product B by the activity-based costing system that the company uses for internal management purposes?

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