Question

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

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