Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 2,100 units and of Product B is 1,200 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 Product B Total Activity 1 $ 60,791 1,600 1,500 3,100 Activity 2 $ 83,421 2,600 1,300 3,900 Activity 3 $ 97,442 840 820 1,660 The overhead cost per unit of Product B is closest to: (Round your intermediate calculations to 2 decimal places.)

Question

Business

Patience Ellis

9 May, 18:11

Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 2,100 units and of Product B is 1,200 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 Product B Total Activity 1 $ 60,791 1,600 1,500 3,100 Activity 2 $ 83,421 2,600 1,300 3,900 Activity 3 $ 97,442 840 820 1,660 The overhead cost per unit of Product B is closest to: (Round your intermediate calculations to 2 decimal places.)

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Answers (1)

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Lina Crane · Answer 1

The overhead cost per unit of product B is $84.20

Explanation:

Abbé company

Product A & B

Activity 1 to 3 respectively:

Estimated Overhead cost $60,791

Estimated Overhead cost $83,421

Estimated Overhead cost $97,442

Total Estimated overhead cost = $241,654

Expected Activity 3,100

Expected Activity 3,900

Expected Activity 1,660

Total expected Activity = 8,660

Overhead Costs Per Activity = $241,654 / 8,660 = $27.91

Product B

Total Activity = 1,500 + 1,300 + 820 = 3,620

Therefore total overhead cost = $27.91 x 3,620 = $101,034.20

Product B sales and Production units in the period equals 1,200 units ... this means our overhead cost per unit =

$101,034.2 divided by 1,200 units

= $84.20