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

Question

Bridget Company uses activity-based costing. The company has two products: A and B The annual production and sales of Product A is 2,000 units and of Product B is 3,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows Expected Activity Product A Activity Cost Pool Est. Cost Product B Activity 1 Activity 2 Activity 3 9,000 400 $12,000 100 $48,000 400 350 400 1,200 The overhead cost per unit of Product B under activity-based costing is closest to which of the following? o a. $16.60 O b. $9.60 C.$13.80 d. $8.63

Explanation / Answer

Calculation of Overhead cost per unit of product B under ABC:

Option a. $16.60 is correct answer.

Activity Product B 1 ($9,000 / 750 x 350) $4,200 2 ($12,000 / 500 x 400) $9,600 3 ($48,000 / 1,600 x 1,200) $36,000 Tota cost $49,800 Unit produced 3,000 Overhead cost per unit $16.60

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