Question

Abel Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 320 units and of Product B is 640 units. There are three activity cost pools, with total cost and activity as follows:

Total Activity
Activity Cost Pools Total Cost Product A Product B Total
Activity 1 $25,530 950 200 1,150
Activity 2 $40,140 2,000 1,600 3,600
Activity 3 $10,649 150 250 400

The activity rate for Activity 2 is closest to:

a. 11.15
b. 20.07
c. 25.09
d. 42.25

Answer 1

Answer:

Activity 2= $11.15

Explanation:

Giving the following information:

Total Activity Activity Cost Pools Total Cost Product A Product B Total

Activity 2 $40,140 2,000 1,600 3,600

To calculate the activity rate for Activity 2, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Activity 2= 40,140 / 3,600

Activity 2= $11.15