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 34,300 units,and the annual production and sales level of Product B is 69,550 units.What is the approximate overhead cost per unit of Product B under activity-based costing?
A) $3.00
B) $2.00
C) $10.28
D) $15.00
E) $2.33

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 34,300 units,and the annual production and sales level of Product B is 69,550 units.What is the approximate overhead cost per unit of Product B under activity-based costing?
A) $3.00 
B) $2.00 
C) $10.28 
D) $15.00 
E) $2.33

Quizplus · Accepted Answer

Activity 1 allocated to Product B line: $87,000 x 2,800/5,800 = $42,000
Activity 2 allocated to Product B line: $62,000 x 5,500/10,000 = $34,100
Activity 3 allocated to Product B line: $93,000 x 5,250/7,750 = $63,000
Total overhead allocated to Product B = $139,100
Overhead per unit of Product B: $139,100/69,550 = $2.00

A Company Has Two Products: a and B