Lindsey Company Uses Activity-Based Costing The Cost Per Unit of Product a Under Activity-Based Costing

question 23

Multiple Choice

Lindsey Company uses activity-based costing. The company has two products: A andB. The annual production and sales of Product A is 5,000 units and of Product B is 2,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: $\begin{array}{lrr}&\text { Estimated}&& \text { Expected Activity }\\\text { Activity Cost Pool }&\text { cost }&\text { ProductA}&\text { Product B}&\text { Total }\\ \text {Activity 1. } &£ 24,000& 200 &800 &1,000\\ \text { Activity 2. } &£36,900 & 750 & 150 &900\\ \text { Activity 3.} &£ 63,000 &1,000 &800&1,800\\\end{array}$


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

---

Definitions:

Treynor-Black Model

A portfolio optimization model that blends a risky asset portfolio optimized for maximum Sharpe ratio with a risk-free asset.

Full Diversification

The process of spreading investments across various assets to reduce exposure to risk from any single asset.

Nonsystematic Risk

The risk associated with an individual investment or a small group of investments, which can be mitigated through diversification.

Treynor-Black Model

An optimization tool used by portfolio managers to balance the trade-off between risk and return by combining actively selected securities with a passively managed market portfolio.