Annika Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 4,000 units and of Product B is 1,000 units. There are three activity cost pools, with total cost and activity as follows: The activity-based costing cost per unit of Product A is closest to:
A) $20.40
B) $10.00
C) $18.15
D) $17.00

Question

Annika Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 4,000 units and of Product B is 1,000 units. There are three activity cost pools, with total cost and activity as follows:  The activity-based costing cost per unit of Product A is closest to:
A) $20.40 
B) $10.00 
C) $18.15 
D) $17.00

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11eacbfc_c667_30d0_8ffe_e7c5a1ddd12b_TB7552_00 The overhead cost charged to Product A is:
 11eacbfc_c667_30d1_8ffe_05e4d0d41416_TB7552_00 Cost per unit = $72,600 ÷ 4,000 units = $18.15 per unit

Annika Company Uses Activity-Based Costing