A company uses activity-based costing to determine the costs of its three products: A,B,and C.The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table:
-Which of the following statements is true regarding this company's activity rates?
A)The activity rate under the activity-based costing system for Activity 2 is $2.00.
B)The activity rate under the activity-based costing system for Activity 2 is $16.00.
C)The activity rate under the activity-based costing system for Activity 2 is $1.50.
D)The activity rate under the activity-based costing system for Activity 2 is $19.50.
E)The activity rate under the activity-based costing system for Activity 2 is $2.81.

Question

A company uses activity-based costing to determine the costs of its three products: A,B,and C.The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: 
-Which of the following statements is true regarding this company's activity rates?
A)The activity rate under the activity-based costing system for Activity 2 is $2.00. 
B)The activity rate under the activity-based costing system for Activity 2 is $16.00. 
C)The activity rate under the activity-based costing system for Activity 2 is $1.50. 
D)The activity rate under the activity-based costing system for Activity 2 is $19.50. 
E)The activity rate under the activity-based costing system for Activity 2 is $2.81.

Quizplus · Accepted Answer

The activity rate for Activity 2 can be calculated as follows:
Activity Rate for Activity 2 = Budgeted Cost of Activity 2 / Budgeted Activity for Activity 2
Activity Rate for Activity 2 = $60,000 / 40,000 direct labor hours
Activity Rate for Activity 2 = $1.50 per direct labor hour.

A Company Uses Activity-Based Costing to Determine the Costs of Its