Matt Company uses activity-based costing. The company has two products: A and B.
ID: 2389201 • Letter: M
Question
Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 $20,000 100 400 500
Activity 2 $37,000 800 200 1,000
Activity 3 $91,200 800 3,000 3,800
The cost per unit of Product A under activity-based costing is closest to:
$2.40.
$3.90.
$10.59.
$6.60.
Explanation / Answer
Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 $20,000 100 400 500
Activity 2 $37,000 800 200 1,000
Activity 3 $91,200 800 3,000 3,800
The cost per unit of Product A under activity-based costing is closest to:
$2.40.
$3.90.
$10.59.
$6.60.
Cost Pool Cost Product A Product B Total
Activity 1 $20,000 100 400 500
Activity 2 $37,000 800 200 1,000
Activity 3 $91,200 800 3,000 3,800
Product A WOULD RECEIVE
Activity 1 --------- ------$4000(40X 100)
Activity 2--------------------- $29600(37X 800)
Activity 3 -------------------$19200(240X 80)
COST PER UNIT OF Product A= 52,800/8000=6.60