Accola Company Uses Activity-Based Costing

question 38

Multiple Choice

Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 1,100 units and of Product B is 700 units. There are three activity cost pools, with estimated costs and expected activity as follows:



-The activity rate for Activity 3 is closest to:

• A) $119.72
• B) $116.18
• C) $26.67
• D) $56.74

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Definitions:

Allowance for Doubtful Accounts

A contra asset account that represents the estimated portion of accounts receivable that may not be collectible.

Allowance Method

An accounting technique used to estimate and account for doubtful accounts receivable and adjust the amount of accounts receivable reported on the balance sheet.

Accounts Receivable

Money owed to a company by its customers for sales or services on credit, considered a current asset on the balance sheet.

Allowance for Doubtful Accounts

A contra-asset account used to estimate and offset the amount of receivables that may not be collected.