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

question 53

Multiple Choice

Matt Company uses activity-based costing. The company has two products: A andB. 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$$\text { Estimated \quad\quad\quad Expectedactivity }$
$\begin{array}{lrr}\text { Activity CostPool }&\text {Cost }&\text {ProductA}&\text {Product B}&\text {Total }\\ \text { Activity1 } &£20,000&100&400&500\\ \text { Activity2} &£37,000&800&200&1,000\\ \text { Activity3 } &£91,200&800&3,000&3,800\\\end{array}$

The cost per unit of Product A under activity-based costing is closest to

• A)£2.40.
• B)£3.90.
• C)£10.59.
• D)£6.60.

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Definitions:

Expected Holding-Period Return

The total return anticipated on an investment over the period it is held, including income and capital gains.

Real Rate of Interest

The real rate of interest is the rate of interest an investor expects to receive after allowing for inflation, reflecting the true purchasing power of interest earnings.

Supply and Demand

A fundamental economic model describing how prices and quantities of goods and services are determined in a market system based on the interaction between suppliers and consumers.

Holding-Period Return

Holding-Period Return is the total return received from holding an asset or portfolio of assets over a period of time, factoring in both income and capital gains or losses.