Reference: 05-09
Aujla Corporation Uses Activity-Based Costing to Determine Product

question 57

Multiple Choice

Reference: 05-09
Aujla Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \text { Activity Cost Pools (and Activity Measures) } & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 239,000 \\\hline \text { Batch setup (setups) } & \$ 234,900 \\\hline \text { General factory (direct labour-hours) } & \$ 159,300 \\\hline\end{array}\\\begin{array} { | l | l | l | l | } \hline & & \text { Expected Activity } & \\\hline \begin{array} { l } \text { Activity Cost } \\\text { Pools }\end{array} & \text { Total } & \text { Product X } & \text { Product Y } \\\hline \text { Machine related } & 10,000 & 4,000 & \\\hline \text { Batch setup } & 9,000 & 8,000 & 6,000 \\\hline \text { General factory } & 9,000 & 3,000 & 1,000 \\\hline\end{array}\end{array}$$
-The activity rate for the batch setup activity cost pool is closest to:

• A)$29.40.
• B)$70.40.
• C)$26.10.
• D)$234.90.

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Definitions:

Monetary Unit Assumption

An accounting principle that assumes money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.

GAAP

Stands for Generally Accepted Accounting Principles; these are a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements.

Corporation

A legal entity owned by shareholders, recognized as a separate entity from its owners, with rights and liabilities distinct from those of its members.

Transferable Shares

Shares that can be transferred from one party to another, typically without restriction.