Figure 17-1 The following information pertains to the EWIN Company's three products:
Refer to Figure 17-1.When EWIN converted over to ABC it discovered the following:

- The product margin for product M using ABC would be
A) $9,000.
B) $13,840.
C) $19,000.
D) $27,000.

Question

Figure 17-1 The following information pertains to the EWIN Company's three products:
 Refer to Figure 17-1.When EWIN converted over to ABC it discovered the following:

- The product margin for product M using ABC would be
A) $9,000. 
B) $13,840. 
C) $19,000. 
D) $27,000.

Quizplus · Accepted Answer

Using ABC, the product margin for product M is calculated as follows:

Direct materials: $40,000 x 0.15 = $6,000
Direct labor: $30,000 x 0.3 = $9,000
Manufacturing overhead: 
Activity 1: $60,000 x (10/30) x (12,000/30,000) = $8,000
Activity 2: $30,000 x (8/30) x (12,000/30,000) = $2,400
Activity 3: $40,000 x (12/30) x (12,000/30,000) = $1,600
Activity 4: $20,000 x (3/30) x (12,000/30,000) = $240
Total manufacturing overhead: $12,240

Product margin: $50,000 - ($6,000 + $9,000 + $12,240) = $22,760

Therefore, the correct answer is B) $13,840.

Figure 17-1 the Following Information Pertains to the EWIN Company's