Question

Annual production and sales level of Product A is 35,500 units, and the annual production and sales level of Product B is 70,750 units. What is the approximate overhead cost per unit of Product A under activity-based costing?

Answer 1

$3.59

Step-by-step explanation:

The computation of the approximate overhead cost per unit is shown below:

Activity 1 allocated to Product A line is

= $99,000 × 4,200 ÷ 8,200

= $50,707.31

Activity 2 allocated to Product A line is

= $74,000 × 5,700 ÷ 12,400

= $34,016.13

Activity 3 allocated to Product A line is

= $117,000 × 3,700 ÷ 10,150 = $42,650.25

Total overhead allocated to Product A = $127,374

So, Overhead per unit of Product A is

= $127,374 ÷ 35,500 units

= $3.59