Reference: 05-08
Albin Company Uses Activity-Based Costing to Compute Product

question 15

Multiple Choice

Reference: 05-08
Albin Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools: $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Estimated Overhead Cost } & \text { Expected Activity } \\\hline \text { Activity 1 } & \$ 42,700 & 2,000 \\\hline \text { Activity 2 } & \$ 24,934 & 2,600 \\\hline \text { Activity 3 } & \$ 49,289 & 2,300 \\\hline\end{array}\\\text { Actual costs and activities for the current year were as follows: }\\\begin{array} { | l | l | l | } \hline & \text { Actual Overhead Cost } & \text { Actual Activity } \\\hline \text { Activity } 1 & \$ 42,855 & 1,995 \\\hline \text { Activity } 2 & \$ 24,794 & 2,595 \\\hline \text { Activity 3 } & \$ 49,294 & 2,295 \\\hline\end{array}\end{array}$$
-The total debits to the Manufacturing Overhead account during the year were closest to:

• A)$116,923.
• B)$116,943.
• C)$116,661.
• D)$120,133.

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Definitions:

Price Level

A measure of the average prices of goods and services in an economy at a given time, often used to gauge inflation.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate measure of economic output over time by valuing goods and services at constant prices.

Money Supply

The complete inventory of monetary assets within an economy at a defined moment.

Money Supply Increases

A situation where the total amount of money in circulation within an economy is expanded.