I changed the number or filing cabinets ordered in total from 80 to 160. Which brought the ABC to 7640 and the Traditional costing product margin to -21600.

A) Why has the customer margin under activity-based costing more than double when the number of units ordered is doubled.

B) Why has the traditional costing product margin exactly doubled from a a loss of 10800 to a loss of 21600

C) Which costing system activity-based costing or traditional costing, provides a more accurate picture of what happens to profits as the number of units ordered increases? Explain.

Data
Manufacturing overhead	$500,000
Selling and administrative overhead	$300,000
	Assembling Units	Processing Orders	Supporting Customers	Other
Manufacturing overhead	50%	35%	5%	10%
Selling and administrative overhead	10%	45%	25%	20%
Total activity	1,000	250	100
	units	orders	customers
OfficeMart orders:
Customers	1	customer
Orders	4	orders
Number of filing cabinets ordered in total	160	units
Selling price	$595
Direct materials	$180
Direct labor	$50
Enter a formula into each of the cells marked with a ? below
Review Problem: Activity-Based Costing
Perform the first stage allocations
	Assembling Units	Processing Orders	Supporting Customers	Other	Total
Manufacturing overhead	$ 250,000	$ 175,000	$ 25,000	$ 50,000	$ 500,000
Selling and administrative overhead	30,000	135,000	75,000	60,000	300,000
Total cost	$ 280,000	$ 310,000	$ 100,000	$ 110,000	$ 800,000
Compute the activity rates
Activity Cost Pools	Total Cost	Total Activity		Activity Rate
Assembling units	$ 280,000	1,000	units	$280	per unit
Processing orders	$ 310,000	250	orders	$1,240	per order
Supporting customers	$ 100,000	100	customers	$1,000	per customer
Compute the overhead cost attributable to the Office Mart orders
Activity Cost Pools	Activity Rate		Activity		ABC Cost
Assembling units	$280	per unit	160	units	$44,800
Processing orders	$1,240	per order	4	orders	$4,960
Supporting customers	$1,000	per customer	1	customer	$1,000
Determine the customer margin for the Office Mart orders under Activity-Based Costing
Sales		$ 95,200
Costs:
Direct materials	$ 28,800
Direct labor	8,000
Unit-related overhead	$44,800
Order-related overhead	$4,960
Customer-related overhead	$1,000	87,560
Customer margin		$ 7,640
Determine the product margin for the Office Mart orders under a traditional cost system
Manufacturing overhead	$500,000
Total activity	1,000	units
Manufacturing overhead per unit	$500	per unit
Sales		$ 95,200
Costs:
Direct materials	$ 28,800
Direct labor	8,000
Manufacturing overhead	80,000	116,800
Traditional costing product margin		$ (21,600)

Answer rating: 100% (QA)

Answer A Because Margin is based on sales IF the number of units is increased then sales also i... View the full answer