A company has two products: A1 and B2.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 A1 is 8,480 units,and the annual production and sales level of Product B2 is 22,310 units.What is the approximate overhead cost per unit of Product A1 under activity-based costing?
A) $8.00
B) $9.00
C) $10.00
D) $12.00
E) $4.00

Question

A company has two products: A1 and B2.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 A1 is 8,480 units,and the annual production and sales level of Product B2 is 22,310 units.What is the approximate overhead cost per unit of Product A1 under activity-based costing?
A) $8.00 
B) $9.00 
C) $10.00 
D) $12.00 
E) $4.00

Quizplus · Accepted Answer

Activity 1 allocated to Product A1 line: $48,000 x 1,200/6,000 = $9,600
Activity 2 allocated to Product A1 line: $63,000 x 2,240/7,000 = $20,160
Activity 3 allocated to Product A1 line: $80,000 x 7,200/8,000 = $72,000
Total overhead allocated to Product A1 = $101,760
Overhead per unit of Product A1: $101,760/8,480 = $12.00

A Company Has Two Products: A1 and B2