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

Question

Matt Company uses activity-based costing. The company has two products: A and 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 overhead cost and expected activity as follows: Expected Activity Activity Cost Pool Est. Cost Product A Product B Activity 1 Activity 2 Activity 3 $20,000 100 37,000 800 $91,200 800 400 200 3,000 The overhead cost per unit of Product A under activity-based costing is closest to which of the following? o a. $6.60 O b. $3.90 C.$10.59 o d. $2.40

Explanation / Answer

Answer - a. $6.60

Overhead cost per unit of Product A Est. Overhead cost Activity Overhead cost Calculation Activity 1 20,000                 100 4,000 20,000/ (100+400) X100 Activity 2 37,000                 800        29,600 37,000/(800+200) X800 Activity 3 91,200                 800        19,200 91,200/(800+3800) X800 Total Overhead allocated to Product A        52,800 Annual Production           8,000 Overhead Cost per unit 6.60

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