Acton Company Has Two Products: a and B

question 62

Multiple Choice

Acton Company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 500 units. The company has traditionally used direct labour hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour hours per unit, and Product B requires 0.2 direct labour hours per unit. The total estimated overhead for next period is $92,023.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as follows:
(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour hours.)

-The overhead cost per unit of Product B under the traditional costing system is closest to which of the following?

• A) $2.63.
• B) $4.32.
• C) $7.49.
• D) $54.13.

---

Definitions:

Lease Cost

The expense incurred from leasing equipment or property, typically categorized as an operating expense in financial statements.

Average Lease Cost

The mean expense incurred from leasing agreements, spread over the term of the lease, generally considered for assets such as equipment or real estate.

Sales Volume

The total quantity of products or services sold by a company within a specific period.

Total Expected Cost

The sum of all costs projected to be incurred for a project or production process, including materials, labor, and overhead.