Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?
A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
A) $3.00
B) $2.00
C) $10.28
D) $15.00
E) $2.33
A) $3.00
Explanation: Activity 1 allocated to Product A line: $87,000 × 3,000/5,800 = $45,000
Activity 2 allocated to Product A line: $62,000 × 4,500/10,000 = $27,900
Activity 3 allocated to Product A line: $93,000 × 2,500/7,750 = $30,000
Total overhead allocated to Product A = $102,900
Overhead per unit of Product A: $102,900/34,300 = $3.00
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