Ask Question
21 June, 19:42

Annika Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 4,000 units and of Product B is 1,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:

Expected Activity

Activity Cost Pool Estimated Costs Product A Product B Total

Activity 1 $18,000 700 300 1,000Activity 2$24,000500 100 600Activity 3 $60,0008004001,200

The cost per unit of Product A under activty-based costing is closest to:

Answer

a. $20.40

b. $18.15

c. $17.00

d. $10.00

+3
Answers (2)
  1. 21 June, 19:54
    0
    b. $18.15

    Explanation:

    Toatal money spent on product A is:

    Activity 1: 700/1000*18000 = $12600

    Activity 2: 500/600*24000 = $20000

    Activity 3: 800/1200*60000 = $40000

    Total money spent on product A = $12600 + $20000 + $40000

    = $72600

    Total units of product A formed = 4000

    Cost per product = $72600/4000 = $18.15

    Therefore, The cost per unit of Product A under activty-based costing is closest to $18.15.
  2. 21 June, 20:01
    0
    AnswerThe answer is $18.15

    Explanation

    Activity cost of project A / Total Activity * Total Cost

    700 / 1000 * 18,000

    = $12,600

    500/600 * 24,000

    = $20,000

    800/1,200 * 60,000

    = $40,000

    Total cost = $12,600 + $20,000 + $40,000 = $ 72,600

    To calculate cost per unit of product A, we divide the total cost by the annual production and sales of product A

    = 72,600/4,000

    = 18.15

    Therefore the cost per unit of product A = $18.15
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Annika Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 4,000 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers