Need help in working out this problem please Lindsy Company uses activity based

ID: 2382407 • Letter: N

Question

Need help in working out this problem please

Lindsy Company uses activity based costing. The company has two products: A and B. The annual production and sales of Product A is 5000 and of Product B is 2000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:
Activity Cost Pool Estimated Cost Expected Activity A Expected Activity B Total
Act 1 24000 200 800 1000
Act 2 36900 750 150 900
Act 3 63000 1000 800 1800

The cost per unit of product A under activity based costing is closes to
A 14.11
B. 13.77
C. 7
D 17.70

Explanation / Answer

Total Cost/Total activity

Activity level for A

Cost for A

Activity 1

200

4,800

Activity 2

750

30,750

Activity 3

1000

35,000

Total

70,550

Total cost for A is 70,550. Total units for A is 5,000. So unit cost for A is 70,550/5,000 = $14.11

Answer: A, $14.11