Question

A company anticipates the cost to heat the building will be $21,000. Product A takes up 500 square feet of space, while Product B takes up 200 square feet. The activity rate per product using activity-based costing would be which of the following?

a. $30/square foot
b. $4.20/square foot
c. $11/square foot
d. $15.20/square foot

Answer 1

The correct answer is a. $30/square foot. The activity rate per product using activity-based costing in this scenario is $30/square foot, calculated by dividing the total cost to heat the building by the total square footage occupied by both products.

Step-by-step explanation:

To calculate the activity rate per product using activity-based costing, we first need to determine the total space occupied by both products and then divide the total cost by the total square footage.

Total space occupied = Space for Product A + Space for Product B = 500 sq ft + 200 sq ft = 700 sq ft. Now, using the total heating costs provided: Activity rate = Total Cost / Total Space = $21,000 / 700 sq ft = $30/square foot.