30.A company uses activity-based costing to determine the costs of its three pro

Question

30.A company uses activity-based costing to determine the costs of its three products: A, B and C. The budgeted cost and activity for each of the company's three activity cost pools are shown below.

Which of the following statements is true regarding this company's activity rates?
A.The activity rate under the activity-based costing system for Activity 2 is $2.00.
B.The activity rate under the activity-based costing system for Activity 2 is $16.00.
C.The activity rate under the activity-based costing system for Activity 2 is $1.50.
D.The activity rate under the activity-based costing system for Activity 2 is $19.50.
E.The activity rate under the activity-based costing system for Activity 2 is $2.81.

Explanation / Answer

B.The activity rate under the activity-based costing system for Activity 2 is $16.00. Activity 1 allocated to Product A1 line: $48,000 x 1,200/6,000 = $9,600 Activity 2 allocated to Product A1 line: $63,000 x 2,240/7,000 = $20,160 Activity 3 allocated to Product A1 line: $80,000 x 7,200/8,000 = $72,000 Total overhead allocated to Product A1 = $101,760 Overhead per unit of Product A1: $101,760/8,480 = $16

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