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Matt Company uses activity-based costing
Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 12,000 units and of Product B is 9,000 units. There are three activity cost pools, with total cost and total activity as follows:
Total Activity
Activity Cost Pool Total Cost Product A Product B Total
Activity 1 $29,200 190 540 730
Activity 2 $41,300 900 280 1,180
Activity 3 $112,625 870 3,380 4,250
The activity-based costing cost per unit of Product A is closest to: (Round your intermediate calculations to 2 decimal places.)
Multiple Choice :
a) $1.78 per units
b) $5.18 per units
c) $1.48 per units
d) $7.17 per units
Expert Solution
Computation of the activity cost per unit for product A:-
Activity 1 = $29,200 / 730 * 190
= $7,600
Activity 2 = $41,300 / 1,180 * 900
= $31,500
Activity 3 = $112,625 / 4,250 * 870
= $23,055
Total cost for product A = $7,600 + $31,500 + $23,055
= $62,155
Cost per unit = Total cost / Number of units
= $62,155 / 12,000
= $5.18 per unit
Correct option is b) $5.18 per unit
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