Selena Company has two products: A andB. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:$\begin{array}{lrr}
&\text { Estimated}&& \text { Expected Activity }\
\text { Activity Cost Pool }&\text { cost }&\text { ProductA}&\text { Product B}&\text { Total }\
\text {Activity 1. } &£ 17,600& 800 & 300 &1,100\
\text { Activity 2. } &£ 12,000 & 500 & 200 &700\
\text { Activity 3.} &£ 26,000 &800 &400&1,200\
\end{array}$

The activity rate under the activity-based costing system for Activity 3 is closest to

A)£46.33.
B)£21.67.
C)£65.00.
D)£18.53.

Question

Selena Company has two products: A andB. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:$\begin{array}{lrr}
&\text { Estimated}&& \text { Expected Activity }\
\text { Activity Cost Pool }&\text { cost }&\text { ProductA}&\text { Product B}&\text { Total }\ 
 \text {Activity 1.  } &£ 17,600& 800 & 300 &1,100\
 \text { Activity 2. } &£ 12,000 & 500 & 200 &700\
 \text {  Activity 3.} &£ 26,000 &800 &400&1,200\
\end{array}$

The activity rate under the activity-based costing system for Activity 3 is closest to

A)£46.33.
B)£21.67.
C)£65.00.
D)£18.53.

Quizplus · Accepted Answer

To calculate the activity rate for Activity 3, we divide the total cost of the activity pool by its expected activity level.

Activity 3's total cost = £19,500 + £16,500 = £36,000

Activity 3's expected activity level = 800 units

Activity rate for Activity 3 = £36,000 / 800 units = £45 per unit

Rounding this to the nearest penny gives an activity rate of £45. Therefore, the closest option is B: £21.67.

Selena Company Has Two Products: a AndB The Activity Rate Under the Activity-Based Costing System for Activity