Reference: 05-05
Abel Company Uses Activity-Based Costing -The Overhead Cost Per Unit of Product B Is Closest

question 22

Multiple Choice

Reference: 05-05
Abel Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 200 units and of Product B are 400 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 16,660 & 600 & 100 & 700 \\\hline \text { Activity 2 } & \$ 18,450 & 1,100 & 700 & 1,800 \\\hline \text { Activity 3 } & \$ 9,731 & 60 & 160 & 220 \\\hline\end{array}$$
-The overhead cost per unit of Product B is closest to:

• A)$81.53.
• B)$41.58.
• C)$17.69.
• D)$74.73.

---

Definitions:

Interaction Effects

Refers to the phenomenon where the effect of one variable on a particular outcome is different depending on the level of another variable.

Relationship

The method by which several concepts, items, or people interact, or the situation of being interconnected.

Main Effect

In the context of experimental design, it refers to the primary impact of an independent variable on a dependent variable, ignoring other variables.

Interaction Effect

Occurs when the effect of one independent variable on the dependent variable changes based on the level of another independent variable.