Question

58. Tabby Totes, a manufacturer of travel carriers for felines, uses an ABC system. Tabby produces two carriers, Comfort Carrier and Luxury Carrier. Production and sales for Comfort Carrier is 800 units and Luxury Carrier is 600 units. Tabby uses thee activity cost pools. Estimated costs and expected activities is as fchows: Activity Cost Estimated Pool Cost Expected Activity Comfort Luxury Carrier Carrier Total Activity 1 $12,000 200 100 Activity 2 $18,000 400 200 600 Activity 3 $10,000 400 400 800 The cost per unit of the Comfort Carrier is: A. $40.00 B. $23.53 C. $42.00 D. $31.25 E. $28.57 300

Please answer this question and provide a solution.

Answer 1

Activity based costing system is a process in which overhead costs are accumulated based on the activity done and then those are allocated product based on actual consumption of those activities by the product. Allocating based on Activity Based Costing Rate per Comfort Carrier Luxury Carrier Activity Pool Total Activity Extimated Cost activity Activity Amount Activity Amount (C) = (B)/(A) (A) (B) $12,000 $18,000 $10,000 (D) (c) x (D) $8,000 $12,000 $5,000 (E) 100 (c) x (E) $4,000 $6,000 $5,000 Activity 1 Activity 2 Activity 3 Total (F) $40.00 300 200 $30.00 600 400 200 $12.50 800 400 400 $40,000 $25,000 $15,000 Units Produced (G) 800 600 Cost per unit (F)/(G) $31.25 $25.00 The corrcet answer is option (D) i.e. 31.25