Question

5. Tanner Company has two products: A and B. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: Activity Cost Pool Activity 1 Activity 2 Activity 3 Estimated Overhead Cost $ 40,000 $ 29,200 $180,000 Expected Activity Product A Product B 200 800 1,000 500 600 5,400 Total 1,000 1,500 6,000 The annual production and sales level of Product A is 9,094 units. The annual production and sales level of Product B is 15,826. The overhead cost per unit of Product A under activity based costing is closest to: a. $1.83 b. $1.98 c. $5.00 d. $10.00 6. Pops Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools: Estimated Overhead Cost $36,000 $20,000 $40,000 Activity 1 Activity 2 Activity 3 Expected Activity 1,800 2,000 2,500 Actual activity for the current year was as follows: Actual Activity 1,815 Activity 1 Activity 2 Activity 3 2,005 2,490 The amount of overhead applied for Activity 3 during the year was closest to: a. $36,300

Answer 1

Answers

• Answer #5
  Correct Answer = Option ‘C’ $ 5.00

Overhead allocated to Product A:
Activity 1	$8,000	=40000*200/1000
Activity 2	$19,467	=29200*1000/1500
Activity 3	$18,000	=180000*600/6000
Total Overhead allocated	$45,467
Units of Product A	9,094
Overhead cost per unit	$5.00	=$45467 / 9094 units

• Answer #6

>Amount of Overhead applied for Activity 3
= 2490 actual activity x ($40000 overhead cost / 2500 expected activity)
= 2490 x 40000 / 2500
= $ 39,840

Correct Answer = Option ‘B’ $ 39,840