Question

Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 1,100 units and of Product B is 700 units. The direct production costs (material and labour) for Product A are $110,600 and for B is $70,000. There are three activity cost pools for overhead, with estimated costs and expected activity as follows: Expected Activity Product A Product B Estimated Cost Total Activity Cost Pool Activity 1 Activity 2 Activity 3 $18,270 35,891 48,796 600 1,600 440 500 300 420 1,100 1,900 860 23. The activity rate for Activity 3 is closest to which of the following? A. $26.67. B. $56.74. C. $116.18. D. $119.72.

Answer 1

Q23. Option(B). $56.74 is the correct answer;

Q24. Option(D). $59.23 is the correct answer;

Q25. Option(B). $107,802 is the correct answer;

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Workings: Q23. Activity Cost Pools Activity 1 Activity 2 Activity 3 Estimated OH COST $ 18,270 $ 35,891 $ 48,796 $ 102,957 Activity level Activity Rate 1,100 $ 16.61 1,900 $ 18.89 860$ 56.74 Q24. Activity Cost Pools Activity 1 Activity 2 Activity 3 Total Costs assigned(a) Units Produced (b) Manufacturing Overhead Cost per unit[(a)*(b)] Product A Estimated Use of Activity-Based OH Drivers Rate Cost Assigned 600 16.61 $ 9,965 1,600 18.89 $ 30,224 440 56.74 $ 24,965 $ 65,155 1,100 Product B Estimated Use of Activity-Based OH Drivers Rate Cost Assigned 500 16.61$ 8,305 300 18.89 $ 5,667 420 56.74 $ 23,831 $ 37,802 700 $ 59.23 $ 54.00 Q25. Particulars Direct Production Costs Manufacturing Overhead Cost Total Annual Production Cost Total Production Unit Product Cost $ $ $ Product A 110,600 $ 65,155$ 175,755 $ 1,100 159.78$ Product B 70,000 37,802 107,802 700 $ 154.00

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