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

question 153

Essay

A company uses activity-based costing to determine the costs of its three products: A, B, and C.The activity rates and activity levels for each of the company's three activity cost pools are shown below.
$\begin{array}{r}{\text { Budgeted Activity }} \quad \quad \quad \quad \quad \quad \\\begin{array}{|l|r|r|r|r|}\hline \begin{array}{l}\text { Activity Cost } \\\text { Pool }\end{array} & \text { Activity Rate } & \text { Product A } & \text { Product B } & \text { Product C } \\\hline \text { Activity 1 } & \$ 19 & 700 & 1,150 & 650 \\\hline \text { Activity 2 } & \$ 27 & 2,400 & 2,100 & 1,500 \\\hline \text { Activity 3 } & \$ 62 & 600 & 1,350 & 1,050\\\hline\end{array}\end{array}$ Compute the company's budgeted cost for each of the three activities under activity-based costing.

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Definitions:

Direct Labor

The labor costs of workers who are directly involved in the production of goods or services.

Indirect Labor

Labor costs not directly tied to the production of goods or services, such as maintenance staff and supervisors.

Work in Process

Goods partially completed in manufacturing, not yet ready for sale.

Raw Materials

The basic materials from which a product is made, used in the early stages of the production process.