Matt Company Uses Activity-Based Costing $\quad$ $\quad$ $\quad$

question 6

Multiple Choice

Matt Company uses activity-based costing.The company has two products: A and B.The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units.There are three activity cost pools,with estimated total cost and expected activity as follows:
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Expected Activity }$$\begin{array} { | l | r | r | r | r | } \hline \begin{array} { l } \text { Activity Cost } \\\text { Pool }\end{array} & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 20,000 & 100 & 400 & 500 \\\hline \text { Activity 2 } & 37,000 &8 0 0& 200 & 1,000 \\\hline \text { Activity 3 } & 91,200 & 8 0 0 &3 , 0 0 0 & 3,800 \\\hline\end{array}$
The cost per unit of Product A under activity-based costing is closest to which of the following?

• A) $2.40.
• B) $3.90.
• C) $6.60.
• D) $10.59. [(20,000/500) * 100 + (37,000/1,000) * 800 + (91,200/3,800) * 800]/8,000 = $6.60.

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Definitions:

Strategic Value

The worth or importance of something in achieving a business's long-term objectives and sustaining its competitive advantage.

Economic Factors

Variables or elements that affect the financial performance and decision-making process within the economy or a specific sector, including inflation, interest rates, and unemployment.

Environmental Scanning

The process of collecting, analyzing, and using information about trends, events, and relationships within an organization's internal and external environment.

General Conditions

The overarching terms, situations, or factors that apply broadly across different contexts, often framing the environment in which specific actions or activities occur.