Question
AltaVista Company produces two products, A and B. The annual production and sales of product A and B are 800 and 500 units, respectively. The
AltaVista Company produces two products, A and B. The annual production and sales of product A and B are 800 and 500 units, respectively. The company has traditionally used direct labor hours to apply manufacturing overhead. Product A requires .3 labor hours per unit and product B requires .2 labor hours per unit. The company has decided to utilize activity based costing with three cost pools. Estimated costs for each pool are as follows:
Activity | Estimated Overhead |
Expected Activity |
Cost Pool | Costs | Product A | Product B | Total |
Activity 1 | $24,025 | 450 | 420 | 870 |
Activity 2 | $16,880 | 2,000 | 750 | 2,750 |
General Factory | $32,014 | 120 | 150 | 270 |
Total | $72,919 |
The overhead cost per unit for product A using activity based costing system is closest to:
A. | $28.25 | |
B. | $48.67 | |
C. | $14.69 | |
D. | $22.51 |
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