Question

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 $ 57,000 2,100 5,700 Activity 2 $ 72,000 3,140 5,660 Activity 3 $ 98,000 8,100 1,700 Annual production and sales level of Product A1 is 9,380 units, and the annual production and sales level of Product B2 is 23,210 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

Answer 1

rate using ABC 13.01

Step-by-step explanation:

We will calculate the ABC rates and the napply to the driver of Product A:

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`\left[\begin{array}{ccccc}&Cost&Driver&Rate&$Product A\\$Activity 1&57,000&7,800&7.308&15,346.8\\$Activity 2&720,00&8,800&8.182&25,691.48\\Activity 3&98000&9800&10&81000\\&&&$Total Applied&122,038.28\\&&&$Units&9,380\\&&&$Rate per unit&13.01\\\end{array}\right]`

We divide the cost pool by the sum of both product use

Activity 1 2,100 + 5,700

2nd Activity 3,140 + 5,660

3rd Activity 8,100 + 1,700

Then, we multiply the rate per activity by Product A numbers

Adde them, and divide by the Product A units