A company has two products: Big and Little.It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
$$\begin{array}{r}
{ \text { Budgeted Activity } } \quad\quad\quad\quad\
\begin{array} { | l | l | r | r | }

\hline \begin{array} { l }
\text { Activity Cost } \
\text { Pool }
\end{array} & \begin{array} { l }
\text { Budgeted } \
\text { Cost }
\end{array} & \text { Big Product } & \text { Little Product } \
\hline \text { Activity 1 } & { \$ 7 , 0 0 0 } & 1,200 & 2,800 \
\hline \text { Activity 2 } & { \$ 91 , 0 0 0 } & 5,250 & 1,750 \
\hline \text { Activity 3 } & \$ 88,000 & \mathbf { 3 } , 200 & 4,800 \
\hline
\end{array}\end{array}$$ Annual production and sales level of big product is 62,525 units, and the annual production and sales level of little product is 251,900 units.
a.Compute the approximate overhead cost per unit of big product under activity-based costing.
b.Compute the approximate overhead cost per unit of little product under activity-based costing.

Question

A company has two products: Big and Little.It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
 $$\begin{array}{r}
{ \text { Budgeted Activity } } \quad\quad\quad\quad\
\begin{array} { | l | l | r | r | }

\hline \begin{array} { l } 
\text { Activity Cost } \
\text { Pool }
\end{array} & \begin{array} { l } 
\text { Budgeted } \
\text { Cost }
\end{array} & \text { Big Product } & \text { Little Product } \
\hline \text { Activity 1 } & { \$ 7 , 0 0 0 } & 1,200 & 2,800 \
\hline \text { Activity 2 } & { \$ 91 , 0 0 0 } & 5,250 & 1,750 \
\hline \text { Activity 3 } & \$ 88,000 & \mathbf { 3 } , 200 & 4,800 \
\hline
\end{array}\end{array}$$ Annual production and sales level of big product is 62,525 units, and the annual production and sales level of little product is 251,900 units.
a.Compute the approximate overhead cost per unit of big product under activity-based costing.
b.Compute the approximate overhead cost per unit of little product under activity-based costing.

Quizplus · Accepted Answer

The Answer of A company has two products: Big and Little.It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
 $$\begin{array}{r}
{ \text { Budgeted Activity } } \quad\quad\quad\quad\
\begin{array} { | l | l | r | r | }

\hline \begin{array} { l } 
\text { Activity Cost } \
\text { Pool }
\end{array} & \begin{array} { l } 
\text { Budgeted } \
\text { Cost }
\end{array} & \text { Big Product } & \text { Little Product } \
\hline \text { Activity 1 } & { \$ 7 , 0 0 0 } & 1,200 & 2,800 \
\hline \text { Activity 2 } & { \$ 91 , 0 0 0 } & 5,250 & 1,750 \
\hline \text { Activity 3 } & \$ 88,000 & \mathbf { 3 } , 200 & 4,800 \
\hline
\end{array}\end{array}$$ Annual production and sales level of big product is 62,525 units, and the annual production and sales level of little product is 251,900 units.
a.Compute the approximate overhead cost per unit of big product under activity-based costing.
b.Compute the approximate overhead cost per unit of little product under activity-based costing.

A Company Has Two Products: Big and Little Annual Production and Sales Level of Big Product Is 62,525