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 $436,300 $200,000 Product B $ 251,700 $104,000 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 688,000 304,000 600,000 $1,600,000 The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product design (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $213,500 157,500 120,000 117,000 $600,000 Product Product B 90,000 62,500 75 300 1 1 NA Total 152,500 375 2 NA NA 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 ($402,000) was organization-sustaining in nature. How much of the company's total costs that vould 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? Multiple Choice $519,000 $117,000 $402,000
