What is the product margin for Product I6 under activity-based costing?
A)$2,000
B)$36,000
C)$11,928
D)$23,688

Question

Quizplus · Accepted Answer

Using activity-based costing, the total cost of producing Product I6 is:
Direct materials: $4,000
Direct labor: $8,000
Activity-based overhead:
- Setup costs: (2 setups x $500/set up) = $1,000
- Machining costs: (100 hours x $30/hr) = $3,000
- Quality control costs: (200 inspections x $5/inspection) = $1,000
- Packaging costs: (2,000 units x $1.50/unit) = $3,000
Total activity-based overhead = $8,000
Total cost = $20,000
The selling price of Product I6 is $31,928 ($35,000 - $3,072). 
Therefore, the product margin is ($31,928 - $20,000) = $11,928.

What Is the Product Margin for Product I6 Under Activity-Based