Question

A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools. Annual production and sales level of Product A is 12,000 units, and the annual production and sales level of Product B is 11,500 units. What total overhead cost is allocated/assigned to Product A under activity-based costing?

Answer 1

Question: the budget activity for product A and B was not added to your question. Below is the remaining part of your question and the answer.

Activity Cost Pool Budgeted Cost Product A Product B

Activity 1 $120,600 $3700 $3500

Activity 2 $84,480 $5,900 $6,900

Activity 3 $116,840 $3,200 $6,000

Answer:

Overhead per unit of Product A = $11.796

Step-by-step explanation:

Activity 1 allocated to Product A = $120,600 * $3700 / ($3700 + $3500)

= $ 61975

Activity 2 allocated to Product A = $84,480 *$5,900 / ($5,900+ $6,900 )

= $ 38940

Activity 3 allocated to Product A = $116,840 * $3,200 / ($3,200 + $6,000)

= $ 40640

Total allocated to Product A = $ 61975+ $ 38940 + $ 40640

= $141,555

Overhead per unit of Product A = Total allocated to Product A/Number of

units produced by product A

Overhead per unit of Product A = $141,555 / 12,000

Overhead per unit of Product A = $11.796