2. A Plus Company uses activity-based costing to determine the costs of its three products: A,...

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.

Solutions

Expert Solution

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.

ekkarill92 answered 2 months ago

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