Reference: 05-06
Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 1,100 units and of Product B are 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | }
\hline \text { Activity } & & \text { Expected Activity } \
\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \
\hline \text { Activity 1 } & \$ 18,271 & 600 & 500 & 1,100 \
\hline \text { Activity 2 } & \$ 35,891 & 1,600 & 300 & 1,900 \
\hline \text { Activity 3 } & \$ 48,796 & 440 & 420 & 860 \
\hline
\end{array}$$
-The overhead cost per unit of Product A is closest to:
A)$57.20.
B)$22.70.
C)$47.89.
D)$59.23.

Question

Reference: 05-06
Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 1,100 units and of Product B are 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Activity } & & \text { Expected Activity } \
\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \
\hline \text { Activity 1 } & \$ 18,271 & 600 & 500 & 1,100 \
\hline \text { Activity 2 } & \$ 35,891 & 1,600 & 300 & 1,900 \
\hline \text { Activity 3 } & \$ 48,796 & 440 & 420 & 860 \
\hline
\end{array}$$
-The overhead cost per unit of Product A is closest to:
A)$57.20.
B)$22.70.
C)$47.89.
D)$59.23.

Quizplus · Accepted Answer

To calculate the overhead cost per unit of Product A using activity-based costing, we allocate the estimated costs to each product based on their expected activity for each cost pool. Then, we divide the total allocated overhead cost for Product A by the number of units of Product A to find the overhead cost per unit.1. Activity 1:    - Allocation to Product A: $ \$18,271 \times \frac{600}{1,100} = \$9,960.55 $2. Activity 2:    - Allocation to Product A: $ \$35,891 \times \frac{1,600}{1,900} = \$30,322.11 $3. Activity 3:    - Allocation to Product A: $ \$48,796 \times \frac{440}{860} = \$25,044.19 $Total allocated overhead cost for Product A = $ \$9,960.55 + \$30,322.11 + \$25,044.19 = \$65,326.85 $Overhead cost per unit for Product A = $ \frac{\$65,326.85}{1,100} = \$59.39 $The closest answer provided is D) $59.23.

Reference: 05-06 Accola Company Uses Activity-Based Costing -The Overhead Cost Per Unit of Product a Is Closest

Reference: 05-06
Accola Company Uses Activity-Based Costing -The Overhead Cost Per Unit of Product a Is Closest