A Company Has Two Products: A1 and B2 Annual Production and Sales Level of Product A1 Is 8,480

question 147

Multiple Choice

A company has two products: A1 and B2.It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: $$\begin{array} { | l | l | r | r | } \hline & &{ \text { Budgeted Activity } } \\\hline \begin{array} { l } \text { Activity Cost } \\\text { Pool }\end{array} & \begin{array} { l } \text { Budgeted } \\\text { Cost }\end{array} & \text { Product A1 } & \text { Product B2 } \\\hline \text { Activity 1 } & \$ 48,000 & 1,200 & 4,800 \\\hline \text { Activity 2 } & \mathbf { \$ 3 , 0 0 0 } & \mathbf { 2 , 2 4 0 } & 4,760 \\\hline \text { Activity 3 } & \mathbf { \$ 8 0 , 0 0 0 } & 7,200 & \mathbf { 8 0 0 } \\\hline\end{array}$$ Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of Product B2 is 22,310 units.What is the approximate overhead cost per unit of Product B2 under activity-based costing?

• A)$8.00
• B)$9.00
• C)$10.00
• D)$12.00
• E)$4.00

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Definitions:

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.

Alternative Goods

Products or services that can be used in place of each other, offering consumers choices based on price, preference, or availability.

Free Trade

The absence of tariffs, quotas, or other government-imposed barriers to international trade, allowing goods to flow freely between countries.

Tariffs

Taxes imposed by a government on imported goods, typically used to protect domestic industries from foreign competition.