In: Accounting
2.
A Plus Company uses activity-based costing to determine the
costs of its three products: A, B, and C. The budgeted cost and
activity for each of the company's three activity cost pools are
shown in the following table:
Budgeted Activity | |||||||||
Activity Cost Pool | Budgeted Cost | Product A | Product B | Product C | |||||
Activity 1 | $ | 70,000 | 6,000 | 9,000 | 20,000 | ||||
Activity 2 | $ | 45,000 | 7,000 | 15,000 | 8,000 | ||||
Activity 3 | $ | 82,000 | 2,500 | 1,000 | 1,625 | ||||
Which of the following statements is true regarding this company's
activity rates?
Multiple Choice
The activity rate under the activity-based costing system for Activity 2 is $2.81.
The activity rate under the activity-based costing system for Activity 2 is $16.00.
The activity rate under the activity-based costing system for Activity 2 is $19.50.
The activity rate under the activity-based costing system for Activity 2 is $1.50.
The activity rate under the activity-based costing system for Activity 2 is $2.00.
Correct answer-------The activity rate under the activity-based costing system for Activity 2 is $1.50.
Working
Calculation of Activity rates | |||||
Activity Cost Pool | Activity driver | Overhead Cost | Expected Activity (B) | Activity rate (A/B) | |
Activity 1 | Number of Activity | $ 70,000.00 | 35,000 | $ 2.00 | Per Activity |
Activity 2 | Number of Activity | $ 45,000.00 | 30000 | $ 1.50 | Per Activity |
Activity 3 | Number of Activity | $ 82,000.00 | 5125 | $ 16.00 | Per Activity |
As it can be seen $16 per activity is rate for Activity 3 not 2 and $ 2 is rate for activity 1.