The company has two products: A and B. The annual production and sales of Produc
ID: 2352344 • Letter: T
Question
The company has two products: A and B. The annual production and sales of Product A is 10,000 units and of production B is 4,000 units. There are three overhead activity centers, with estimated overhead costs and expected activity as follows:Overhead
-Machine Setups $25,000
-Purchase Orders $65,000
-General Factory $90,000
Expected Activity-Product A
-Machine Setups 150
-Purchase Orders 800
-General Factory 1,000
Expected Activity-Product B
-Machine Setups 100
-Purchase Orders 200
-General Factory 2,000
The overhead costs per unit of Product A using activity-based costing is closest to:
a. $6.00
b. $3.00
c. $1.50
d. $9.70
Explanation / Answer
machine setup cost for Product A = $25,000*150/(150 +100) =$15000 Purchase Orders for Product A =65000*800/(800+200) =$52000 General Factory for Product A = $90,000*1,000/(1,000 +2,000 ) =$30000 Total cost = $97000 overhead costs per unit of Product A = $97000/10,000 = $9.7 d. $9.70