Question

Lindsey Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 9,000 units and of Product B is 8,000 units. There are three activity cost pools, with total cost and total activity as follows:

		Total Activity
Activity Cost Pool	Total Cost	Product A	Product B	Total
Activity 1	$31,000	100	520	620
Activity 2	$46,287	860	250	1,110
Activity 3	$156,750	840	3,910	4,750

The activity-based costing cost per unit of Product A is closest to: (Round your intermediate calculations to 2 decimal places.)

$1.82

$12.61

$7.62

$4.32

Answer 1

Correct Answer -----$7.62

Calculations

Activity Cost Pools	Total Costs	Total Activity	Activity Rates
	(A)	(B)	(A/B)
Activity 1	$      31,000.00	620	$           50.00	Per activity
Activity 2	$      46,287.00	1,110	$           41.70	Per activity
Activity 3	$   156,750.00	4,750	$           33.00	Per activity

Allocation of Overheads to Product A

Working
Product A
Activity Cost Pool	Activity rate	No. of activities	ABC Cost
Activity 1	$   50.00	100	$   5,000.00
Activity 2	$   41.70	860	$   35,862.00
Activity 3	$ 33.00	840	$    27,720.00
Total Overhead cost (A)			$    68,582.00
Total units Produced (B)			9000
Cost per Unit (A/B)			$                         7.62