Question

Nick Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:
Expected Activity

Activity Cost Pool Estimated Costs Product A Product B Total

Activity 1 $32,600 700 300 1,000Activity 2$17,600600 200 800Activity 3 $52,500 400100500

The activity rate under the activity-based costing system for Activity 3 is closest to:

Answer
a. $44.65
b. $105.00
c. $525.00
d. $205.00

Answer 1

Answer:

b. $105.00

Explanation:

The computation of the activity rate under the activity-based costing system  is shown below:

For Activity 3,

The activity rate is

= Estimated cost ÷ Estimated activity

= $52,500 ÷ 500

= $105

We simply divided the estimated cost by the estimated activity to get the activity rate

All other information which is given is not considered. Hence, ignored it