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 $73,000; 6,300; 9,300; 20,300
Activity 2 $48,000; 7,300; 15,300; 8,300
Activity 3 $88,000; 2,800; 1,300; 1,925
Which of the following statements is true regarding this company's activity rates?
a. The activity rate under the activity-based costing system for Activity 2 is $1.55.
b. The activity rate under the activity-based costing system for Activity 2 is $18.19.
c. The activity rate under the activity-based costing system for Activity 2 is $14.61.
d. The activity rate under the activity-based costing system for Activity 2 is $2.93.
e. The activity rate under the activity-based costing system for Activity 2 is $2.03.
Answer: a. The activity rate under the activity-based costing system for Activity 2 is $1.55
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