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  3. 2. a plus company uses activity-based costing to d

2. A Plus Company uses activity-based costing to determine the costs of its three products: A, B,...

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Accounting

2.

A Plus Company uses activity-based costing to determine thecosts of its three products: A, B, and C. The budgeted cost andactivity for each of the company's three activity cost pools areshown in the following table:

Budgeted Activity
Activity Cost PoolBudgeted CostProduct AProduct BProduct C
Activity 1$70,0006,0009,00020,000
Activity 2$45,0007,00015,0008,000
Activity 3$82,0002,5001,0001,625


Which of the following statements is true regarding this company'sactivity rates?

Multiple Choice

  • The activity rate under the activity-based costing system forActivity 2 is $2.81.

  • The activity rate under the activity-based costing system forActivity 2 is $16.00.

  • The activity rate under the activity-based costing system forActivity 2 is $19.50.

  • The activity rate under the activity-based costing system forActivity 2 is $1.50.

  • The activity rate under the activity-based costing system forActivity 2 is $2.00.

Answer & Explanation Solved by verified expert
4.0 Ratings (577 Votes)

Correct answer-------The activity rate under the activity-based costing system for Activity 2 is $1.50.

Working

Calculation of Activity rates
Activity Cost Pool Activity driver Overhead Cost Expected Activity (B) Activity rate (A/B)
Activity 1 Number of Activity $         70,000.00 35,000 $            2.00 Per Activity
Activity 2 Number of Activity $         45,000.00 30000 $            1.50 Per Activity
Activity 3 Number of Activity $         82,000.00 5125 $          16.00 Per Activity

As it can be seen $16 per activity is rate for Activity 3 not 2 and $ 2 is rate for activity 1.
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