Question

Lindsey Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with total cost and total activity as follows: Total Activity Activity Cost Pool Total Cost Product A Product B Total Activity 1 $26,400 170 380 550 Activity 2 $54,365 950 360 1,310 Activity 3 $136,880 900 3,820 4,720 The activity-based costing cost per unit of Product A is closest to: (Round your intermediate calculations to 2 decimal places.) $14.64 $9.21 $6.71 $5.91

Answer 1

Answer:The activity-based costing cost per unit of Product A=$9.21

Step-by-step explanation:

Product A Product B

Units Produced 8000 units 6000 units

Activity Cost Pool Total Cost Product A Product B Total Activity

Activity 1 $26,400 170 380 550

Activity 2 $54,365 950 360 1,310

Activity 3 $136,880 900 3,820 4,720

Activity−basedcost for Poduct A

Activity−basedcost for Activity1= total Cost/total no. of activityx activity for particular product which is product A

=26,400/550 x 170= 8160

Activity−basedcost for Activity2= total Cost/total no. of activityx activity for particular product which is product A

=54,365/1310 x 950=39,425

Activity−basedcost for Activity3= total Cost/total no. of activityx activity for particular product which is product A

=136,880/4720 x 900=26100

Total activity based cost for Product A = $8,160 + $39,425 +$26,100=$73,685

The activity-based costing cost per unit of Product A = Total activity based cost for Product A/ Units Produced for product A=$73,685/8000=$9.21