Pat Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 2,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: Expected ActivityActivity Cost PoolEstimated CostProduct AProduct BTotalActivity 1……………$12,0007502501,000Activity 2……………$16,000400100500Activity 3……………$36,0002,0001,0003,000The cost per unit of Product B under activity-based costing is closest to: A. $10.67. B. $6.40. C. $6.00. D. $9.10.

Cost per unit of Product B under activity-based = Allocation of total cost to product B / No. of…

Answered: Pat Company uses activity-based…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Pat Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 2,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:

	Expected Activity
Activity Cost Pool	Estimated Cost	Product A	Product B	Total
Activity 1……………	$12,000	750	250	1,000
Activity 2……………	$16,000	400	100	500
Activity 3……………	$36,000	2,000	1,000	3,000

The cost per unit of Product B under activity-based costing is closest to:

A. $10.67.

B. $6.40.

C. $6.00.

D. $9.10.

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