A company has two products: A and B. It uses activity-based
costing and has prepared the following analysis showing budgeted
cost and activity for each of its three activity cost
pools:
Budgeted Activity | |||||||||
Activity Cost Pool | Budgeted Cost | Product A | Product B | ||||||
Activity 1 | $ | 89,000 | 3,200 | 3,000 | |||||
Activity 2 | $ | 64,000 | 4,700 | 5,700 | |||||
Activity 3 | $ | 97,000 | 2,700 | 5,450 | |||||
Annual production and sales level of Product A is 34,500 units, and
the annual production and sales level of Product B is 69,750 units.
What is the approximate overhead cost per unit of Product B under
activity-based costing?
Activity Cost Pool | Budgeted Cost | Product A | Product B | Product A | Product B |
Activity 1 | $ 89,000.00 | 3,200 | 3,000 | $ 45,935.48 | $ 43,064.52 |
Activity 2 | $ 64,000.00 | 4,700 | 5,700 | $ 28,923.08 | $ 35,076.92 |
Activity 3 | $ 97,000.00 | 2,700 | 5,450 | $ 32,134.97 | $ 64,865.03 |
TOTAL | $ 250,000.00 | 10,600 | 14,150 | $ 106,993.53 | $ 143,006.47 |
Overhead Cost per unit = 143,006.47 / 69,750 = $ 2.05 per unit
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