Question

Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 3,000 units and of Product B is 1,650 units. There are three activity cost pools, with estimated costs and expected activity as follows: Activity Cost Pools Estimated Overhead Cost Expected Activity Product A 1 $109,319 2,500 2,400 4,900 ActivityProduct B 2 $135,033 3,500 2,200 5,700 ActivityTotal Activity 3 $143,990 1,200 1,180 2,380 The overhead cost per unit of Product B is closest to _______.

Answer 1

Answer:

$107.30

Explanation:

Overhead cost for Product B under Activity based costing is  as follows:

For Activity 1:

= Estimated overhead cost × (Expected activity ÷ Total activity)

= $109,319 × (2,400 ÷ 4,900)

= $53,544

For Activity 2:

= Estimated overhead cost × (Expected activity ÷ Total activity)

= $135,033 × (2,200 ÷ 5,700)

= $52,118

Activity 3:

= Estimated overhead cost × (Expected activity ÷ Total activity)

= $143,990 × (1,180 ÷ 2,380)

= $71,390

Total Expense :

= $53,544 + $52,118 + $71,390

= $177,052

Overhead Per unit cost:

= Total Expense ÷ Annual production and sales of Product B

= $177,052 ÷ 1,650 units

= $107.30

Therefore, the overhead cost per unit of Product B is closest to $107.30.