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A company has two products: A1 and B2
A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
| Budgeted Activity | |||||||||
| Activity Cost Pool | Budgeted Cost | Product A1 | Product B2 | ||||||
| Activity 1 | $ | 50,000 | 1,400 | 5,000 | |||||
| Activity 2 | $ | 65,000 | 2,440 | 4,960 | |||||
| Activity 3 | $ | 84,000 | 7,400 | 1,000 | |||||
Annual production and sales level of Product A1 is 8,680 units, and the annual production and sales level of Product B2 is 22,510 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?
Multiple Choice
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$7.81
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$8.78
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$10.00
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$12.25
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$4.12
Expert Solution
| 1] | CALCULATION OF ACTIVITY RATES: | |||
| Activity | Budgeted Cost | Total Budgeted Activity | Activity Rate | |
| 1 | $ 50,000 | 6400 | $ 7.81 | |
| 2 | $ 65,000 | 7400 | $ 8.78 | |
| 3 | $ 84,000 | 8400 | $ 10.00 | |
| 2] | OH assigned to A1: | |||
| Activity | Activity Volume | Rate | OH assigned | |
| 1 | 1400 | $ 7.81 | $ 10,937.50 | |
| 2 | 2440 | $ 8.78 | $ 21,432.43 | |
| 3 | 7400 | $ 10.00 | $ 74,000.00 | |
| Total overhead assigned to A1 | $ 106,369.93 | |||
| Units produced | 8680 | |||
| Overhead cost per unit | $ 12.25 |
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