20 Assume a companys activity-based costing system includes three activities with the following activity rates:

Activity Cost Pool	Activity Rate
Travel	$ 2	per mile driven
Deliveries	$ 50	per delivery
Customer service	$ 22	per phone call

Two of the companys many customers include Customer A and Customer B. These two customers consumed the companys activities as follows:

	Total Expected Activity
	Customer A	Customer B
Travel (number of miles driven)	350	250
Deliveries (number of deliveries)	15	5
Customer service (number of phone calls)	20	12

How much cost would be assigned from the Travel activity to Customer A?

Multiple Choice

• $60

• $700

• $175

• $500

• 22

  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	80,800	71,700	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

• $209,620

• $202,820

• $204,620

• $199,820