A company has two products: A and B. It uses activity-based costing and has prep

Question

A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Budgeted Activity Activity Cost Pool Activity 1 Activity 2 Activity 3 Budgeted Cost $97,000 $72,000 $113,000 Product A 4,000 5,500 3,500 Product B 3,800 6,500 6,250 Annual production and sales level of Product A Is 35,300 units, and the annual production and sales level of Product B Is 70,550 unlts. What is the approximate overhead cost per unlt of Product A under activity-based costing? O $225 O $3.49 O $10.28 O $12.44

Explanation / Answer

Calculate overhead cost per unit under activity based costing :

so answer is b) $3.49

Product A Activity 1 (97000/7800)*4000 49744 Activity 2 (72000/12000)*5500 33000 Activity 3 (113000/9750)*3500 40564 Total overhead cost 123308 Units 35300 Overhead cost per unit $3.49

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