Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: $3$14,600500250750\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & \text { Estimated } & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \text { Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity } 1 & \$ 22,000 & 400 & 100 & 500 \\\hline \text { Activity } 2 & \$ 16,240 & 380 & 200 & 580 \\\hline \text { Activity } 3 & \$ 14,600 & 500 & 250 & 750 \\\hline\end{array}$ The activity rate under the activity-based costing system for Activity 3 is closest to:

A) $28.87.
B) $58.40.
C) $19.47.
D) $70.45.

Question

Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:

3$14,600500250750\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & \text { Estimated } & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \text { Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity } 1 & \$ 22,000 & 400 & 100 & 500 \\\hline \text { Activity } 2 & \$ 16,240 & 380 & 200 & 580 \\\hline \text { Activity } 3 & \$ 14,600 & 500 & 250 & 750 \\\hline\end{array}

The activity rate under the activity-based costing system for Activity 3 is closest to:

A) $28.87.
B) $58.40.
C) $19.47.
D) $70.45.

Jolanta Gracz · Accepted Answer

Final Answer : C, Explanation :  The activity rate for Activity 3 is calculated by dividing the estimated cost by the total expected activity: $14,600 / 750 = $19.47.

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