Question

Murphy Company produces two products: Standard and Deluxe. The company uses an activity-based costing system. Murphy...

Murphy Company produces two products: Standard and Deluxe. The company uses an activity-based costing system. Murphy produces 8,000 units of Standard and 2,000 units of Deluxe. The company uses two activity cost pools, with estimated total cost and activity as follows: Expected Activity Activity Cost Pool Estimated Cost Standard Deluxe #1 $12,000 500 250 #2 $24,000 400 1,200 What is the cost per unit of Deluxe under activity-based costing? $1.75 $11.00 $15.00 $16.00

Homework Answers

Answer #1

The correct answer is $ 11.00

Note :

1. Activity rates

Expected Activity
Activity Cost Pool Estimated Cost Standard Deluxe Total Activity Activity Rate ( Estimated Cost / Total Activity)
# 1 12,000 500 250 750 16.00
# 2 24,000 400 1200 1600 15.00

2.

For Deluxe
Activity Cost Pool Activity Rate Activity Costs Allocated ( Activity Rate * Activity)
# 1 16.00 250 4,000
# 2 15.00 1200 18,000
Total Cost 22,000
Total Units 2,000
cost per unit of Deluxe ( total Cost / total Units) 11.00
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