Question

5. Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity overhead cost pools, with estimated total overhead cost and expected activity as follows: Activity Cost Pool Expected Activity Product A Product B Total Estimated Cost $20,000 $37,000 $91,200 Activity 1... Activity 2.......... Activity 3 100 800 800 400 200 3,000 500 1,000 3,800 The applied overhead cost per unit of Product A under activity-based costing is closest to:

Answer 1

Overhead rate = Estimated Cost / Total Activity

Activity 1 = 20,000/500 = 40

Activty 2 = 37,000/1000 = 37

activity 3 =91,200 /3,800 = 24

Cost applied to Product A = Activity *Rate

=100*40+800*37+800*24

=$ 52,800

PerUnit cost of Product A = Total Cost /Units = $52,800 / 8000 = $6.60 (Answer)