Question

Mabbe Company uses activity-based costing. The company has two products: A and 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 estimated costs and expected activity as follows:

Activity Cost Pools Estimated Overhead Cost Expected Activity
Product A Product B Product C
Activity 1 $17460 600 600 1200
Activity 2 $19987 1700 600 2300
Activity 3 $29884 400 120 520

The activity rate for Activity 2 is closest to: __________
a. $29.274
b. $33.311
c. $11.764
d. $8.69

Answer 1

d. $8.69

Step-by-step explanation:

Activity rate for Activity 2 = Estimated Overhead Cost / Expected Activity

Activity rate for Activity 2 = $19,987.00 / 2300

Activity rate for Activity 2 = $8.69 per activity