A Company Uses Activity-Based Costing to Determine the Costs of Its

question 59

Essay

A company uses activity-based costing to determine the costs of its three products: A, B, and C.The budgeted cost and activity for each of the company's three activity cost pools are shown below.
$\begin{array}{r}{\text { Budgeted Activity }} \quad \quad \quad \quad \quad \quad \\\begin{array}{|l|r|r|r|r|}\hline \begin{array}{l}\text { Activity Cost } \\\text { Pool }\end{array} & {\begin{array}{l}\text { Budgeted } \\\text { Cost }\end{array}} & \text { Product A } & \text { Product B } & \text { Product C } \\\hline \text { Activity 1 } & \$ 140,000 & 7,500 & 4,000 & 6,000 \\\hline \text { Activity 2 } & \$ 54,000 & 2,500 & 2,000 & 1,500 \\\hline \text { Activity 3 } & \$ 28,000 & 15,000 & 25,000 & 30,000\\\hline\end{array}\end{array}$ Compute the company's activity rates under activity-based costing for each of the three activities.

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Definitions:

Repossessed Inventory

Goods taken back by a seller or lender from the buyer, typically due to failure to make required payments.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Persuasive Evidence

Documentation or information that is sufficiently reliable and convincing to influence a person's beliefs or decisions, often mentioned in the context of sales and revenue recognition.

Revenue Recognition

The accounting principle that dictates the specific conditions under which revenue is recognized and recorded.