Lindsey Company uses activity-based costing. The company has two products: A and

Question

Lindsey Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 9,000 units and of Product B is 8,000 units. There ar three activity cost pools, with total cost and total activity as follows: Total Activity Activity Cost Pool Activity 1 Activity 2 Activity 3 Total Cost $31,000 $46,287 $156,750 Product A 100 860 840 Product B 520 250 3,910 Total 620 1,110 4,750 The activity-based costing cost per unit of Product A is closest to: (Round your intermediate calculations to 2 decimal places.) O $762 O $4.32 O $1.82 $12.61

Explanation / Answer

Activity based cost for:

Activity 1=Total cost/Total activity

=(31000/620)=$50

Activity 2=(46287/1110)=41.70

Activity 3=(156750/4750)=$33

Hence total cost for A=(50*100)+(41.70*860)+(33*840)

=$68582

Hence cost per unit for Product A =$68582/9000 units

which is equal to

=$7.62(Approx).

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