Abel Company uses activity-based costing. The company has two products: A and B. The annual production...

Abel Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 200 units and of Product B is 400 units. There are three activity cost pools, with estimated costs and expected activity as follows:

		Expected Activity
Activity Cost Pool	Estimated Cost	Product A	Product B	Total
Activity 1	$16,660	600	100	700
Activity 2	18,450	1,100	700	1,800
Activity 3	9,731	60	160	220

22. The cost per unit of Product A is closest to which of the following?

A. $27.91.

B. $56.38.

C. $141.04.

D. $70.52.

Solutions

Expert Solution

Activity rate=Respective cost/Respective activity

Activity rate for:

Activity 1=(16,660/700)=$23.8

Activity 2=(18450/1800)=$10.25

Activity 3=(9731/220)=$44.2318182(Approx)

Hence cost for A=(23.8*600)+(10.25*1100)+(44.2318182*60)

=$28208.91(Approx)

Hence cost per unit=28208.91/200

=$141.04(Approx)

ekkarill92 answered 2 years ago

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