A Company Has Two Products: A1 and B2 Annual Production and Sales Level of Product A1 Is 8,480

question 8

Multiple Choice

A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: $$\begin{array} { l c c c } & & { \text { Budgeted Activity } } \\\text { Activity Cost Pool } & \text { Budgeted Cost } & \text { Product Al } & \text { Product B2 } \\\text { Activity 1 } & \$ 48,000 & 1,200 & 4,800 \\\text { Activity 2 } & \$ 63,000 & 2,240 & 4,760 \\\text { Activity 3 } & \$ 80,000 & 7,200 & 800\end{array}$$ Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of Product B2 is 22,310 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

• A) $8.00
• B) $9.00
• C) $10.00
• D) $12.00
• E) $4.00

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Definitions:

Monetary Rule

A guideline for the monetary policy stating that the central bank should aim at regulating the money supply to maintain stable prices, output, and employment.

Rational Expectations

An economic theory proposing that individuals make decisions based on their best forecast using all available information, predicting future events with some degree of accuracy.

Federal Reserve

The central bank of the United States, responsible for monetary policy.

Life Expectancy

The average period that an organism is expected to live, based on statistical analysis.