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

Question

Abraham Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A Is 2,400 units and of Product B Is 1,350 unts. There are three activity cost pools, with estimated costs and expected activity as follows: Estimated ??? Total Expected Activity Activitues Overhead Cost Product A Product B $75,887 1,800 3,700 Activity 2$99,855 2,900 Act 16004,500 1900 $112,670 960 940 The overhead cost per unit of Product A is closest to: O $66.77 O $76.91 O $9494 O $53.40 0

Explanation / Answer

Activity based cost for:

Activity 1=Total cost/Total activity

=(75887/3700)=$20.51

Activity 2=(99855/4500)=$22.19

Activity 3=(112670/1900)=$59.3

Hence total cost for A=(20.51*1900)+(22.19*2900)+(59.3*960)

=$160248

Hence cost per unit for Product A =$160248/2400 units

which is equal to

=$66.77

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