A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Budgeted Activity Activity Cost Pool Budgeted Cost Product A1 Product B2 Activity 1 $ 63,000 2,700 6,300 Activity 2 $ 78,000 3,740 6,260 Activity 3 $ 110,000 8,700 2,300 Annual production and sales level of Product A1 is 9,980 units, and the annual production and sales level of Product B2 is 23,810 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

Question

Business

Shirley

14 January, 12:26

A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Budgeted Activity Activity Cost Pool Budgeted Cost Product A1 Product B2 Activity 1 $ 63,000 2,700 6,300 Activity 2 $ 78,000 3,740 6,260 Activity 3 $ 110,000 8,700 2,300 Annual production and sales level of Product A1 is 9,980 units, and the annual production and sales level of Product B2 is 23,810 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

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Dominic · Answer 1

The overhead cost per unit of product A1 under activity based costing is $13.53

Explanation:

Activity 1 allocated to product A1 line: $63,000*2,700/9,000 = $18,900

Activity 2 allocated to product A1 line: $78,000*3,740/10,000 = $29,172

Activity 3 allocated to product A1 line: $110,000*8,700/11,000 = $87,000

Total overhead allocated to product A1 = $18,900+$29,172+$87,000 = $135,072

Overhead per unit of product A1: 135,072/9,980 = $13.53