Question

Chibucos Company has two products: A and B. The annual production and sales level of Product A is 9,094 units. The annual production and sales level of Product B is 15,826. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools

Answer 1

Chibucos Company has two products: A and B. The annual production and sales level of Product A is 9,094 units. The annual production and sales level of Product B is 15,826. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools

Answer =

Activity 1 = $19.467 per driver unit ($29,200/1500).

Activity 2 = $40 per driver unit ($40,000/1,000).

Activity 3 = $30 per driver unit ($180,000/6000).

Product A would receive:

Activity	Cost Allocated to Product A
Activity 1	$ 19467	$19.467 * 1000
Activity 2	$ 8000	$ 40 * 200
Activity 3	$ 18000	$ 30 * 600
Total cost	$ 45467

The cost per unit of Product A is $5 ($45,467/9,094).

Product B would receive:

Activity	Cost Allocated to Product B
Activity 1	$ 9733	$19.467 * 500
Activity 2	$ 32000	$ 40 * 800
Activity 3	$ 162000	$ 30 * 5400
Total cost	$ 203733

The cost per unit of Product A is $12.87 ($203733/15,826).