Question

1.) A 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	$	81,000			7,100			10,100			21,100
Activity 2	$	56,000			8,100			16,100			9,100
Activity 3	$	104,000			3,600			2,100			2,725

How much overhead will be assigned to Product B using activity-based costing?

a.) $93,565.31 b.) $74,358.24 c.) $81,000.00 d.) $241,000.00 e.)71,514.24

2.) A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:

				Budgeted Activity
Activity Cost Pool	Budgeted Cost			Product A1			Product B2
Activity 1	$	57,000			2,100			5,700
Activity 2	$	72,000			3,140			5,660
Activity 3	$	98,000			8,100			1,700

Annual production and sales level of Product A1 is 9,380 units, and the annual production and sales level of Product B2 is 23,210 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

a.) $4.52 b.) $10.00 c.) $8.18 d.) $7.31 e.)$13.01

Answer 1

Question 1

Correct answer------------(b.) $74,358.24

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Activity 1	Number of Activity	$        81,000.00	38300	$               2.11	Per Activity
Activity 2	Number of Activity	$        56,000.00	33300	$               1.68	Per Activity
Activity 3	Number of Activity	$      104,000.00	8425	$             12.34	Per Activity

.

Cost assigned to Product B
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Activity 1	$                       2.11	10100	$         21,360.31
Activity 2	$                       1.68	16100	$         27,075.08
Activity 3	$                     12.34	2100	$         25,922.85
Total Overheads assigned			$         74,358.24

Question 2

Correct answer------------(e) $13.01

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Activity 1	Number of Activity	$        57,000.00	7800	$               7.31	Per Activity
Activity 2	Number of Activity	$        72,000.00	8800	$               8.18	Per Activity
Activity 3	Number of Activity	$        98,000.00	9800	$             10.00	Per Activity

.

Cost assigned to Product A1
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Activity 1	$                       7.31	2100	$         15,346.15
Activity 2	$                       8.18	3140	$         25,690.91
Activity 3	$                     10.00	8100	$         81,000.00
Total Overheads assigned			$       122,037.06
Production			9,380.00
Overhead cost per unit			$ 13.01