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

question 148

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.
$$\begin{array} { | l | c | r | r | r | } \hline & & { \text { Budgeted Activity } } \\\hline \begin{array} { l } \text { Activity Cost } \\\text { Pool }\end{array} & \text { Activity Rate } & \text { Product A } & \text { Product B } & \text { Product C } \\\hline \text { Activity 1 } & \$ 19 & 700 & 1,150 & 650 \\\hline \text { Activity 2 } & \$ 27 & 2,400 & 2,100 & 1,500 \\\hline \text { Activity 3 } & \$ 62 & 600 & 1,350 & 1,050 \\\hline\end{array}$$
Compute the company's budgeted cost for each of the three activities under activity-based costing.

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Definitions:

Financial Lease

A long-term, non-cancellable lease contract where the lessee is responsible for maintenance and has the option to acquire ownership at the end of the lease term.

Capital Lease

A lease agreement that allows a lessee to effectively purchase an asset over time through lease payments, characterized by the transfer of ownership rights of the asset from the lessor to the lessee.

Accountants

Professionals who practice accounting, which involves financial reporting, tax, auditing, and analysis.

Operating Lease

A lease agreement for the use of equipment or property for a shorter period than the asset's life expectancy, without transferring ownership rights.