Question

Basic Company uses activity-based costing. Assume the predetermined overhead allocation rates are $0.90 per machine hour for mixing department and $2.20 per test for sampling department. Assume that each unit requires 3 machine hours and 2 tests.

What is the mixing and sampling cost assigned to one unit?
a) $0.90 mixing;$2.20 sampling
b) $2.70 mixing; $2.20 sampling
c) $0.90 mixing; $ 4.40 sampling
d) $2.70 mixing; $4.40 sampling

Answer 1

$2.70 mixing; $4.40 sampling

Step-by-step explanation:

Activity based costing is a process by which the various activities in a production process are identified and cost allocated to each one. Each of these actity costs are added as product cost. It involves assigning indirect cost to direct cost.

For mixing department the cost rate is $0.9 per hour for 3 machine hours. So cost is (0.9* 3)= $2.7

For sampling the rate is $2.20 for 2 tests. So cost is (2.20* 2)= $4.4