Question

Abbe Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 800 units and of Product B is 600 units.

There are three activity cost pools, with total cost and activity as follows:
Activity Cost Pool
Activity 1- $17,460
Activity 2- $19,987
Activity 3- $29,884
Total Activity
Product A 600 1,700 40
Product B 600 600 120
Total 1,200 2,300 520
What are the activity rates for activites 1, 2 and 3?
What is the cost per unit for Product A and B?

Answer 1

Activity Rates are:

1 = $14.55 per activity

2 = $8.69 per activity

3 = $57.47 per activity

Cost per product

A = $32.2525

B= $34.7333

Step-by-step explanation:

As for the provided information,

There are three activities.

Activity 1 = $17,460 and total = 1,200

Rate of activity = $17,460/1,200 = $14.55 per activity

Activity 2 = $19,987 and total activity = 2,300

Rate of activity = $19,987/2,300 = $8.69 per activity

Activity 3 = $29,884 and total activity = 520

Rate of activity = $29,884/520 = $57.47 per activity.

Costs of each product

Product A = ($14.55
`*` 600) + ($8.69
`*` 1,700) + ($57.47
`*` 40)

= $8,730 + $14,773 + $2,298

= $25,801

Cost per unit = $25,802/800 = $32.2525

Product B = ($14.55
`*` 600) + ($8.69
`*` 600) + ($57.47
`*` 120)

= $8,730 + $5,214 + $6,896

= $20,840

Cost per unit = $20,840/600 = $34.73