Asked by Reuben Acosta on May 08, 2024
Verified
Which of the following statements is true regarding this company's activity rates?
A) The activity rate under the activity-based costing system for Activity 2 is $2.00.
B) The activity rate under the activity-based costing system for Activity 2 is $16.00.
C) The activity rate under the activity-based costing system for Activity 2 is $1.50.
D) The activity rate under the activity-based costing system for Activity 2 is $19.50.
E) The activity rate under the activity-based costing system for Activity 2 is $2.81.
Activity-Based Costing
A method of accounting that allocates costs to specific products or services based on the resources they consume.
Activity Rates
In activity-based costing, the costs assigned to goods and services based on the specific activities and resources that go into their production or delivery.
Activity Cost Pools
Aggregations of all the costs associated with a particular activity, used in activity-based costing.
- Get acquainted with the framework and application of activity-based costing (ABC).
- Examine the impact of utilizing ABC in pinpointing products that yield profit.
Verified Answer
TT
Tsion TesfayeMay 12, 2024
Final Answer :
C
Explanation :
The activity rate for Activity 2 can be calculated as follows:
Activity Rate for Activity 2 = Budgeted Cost of Activity 2 / Budgeted Activity for Activity 2
Activity Rate for Activity 2 = $60,000 / 40,000 direct labor hours
Activity Rate for Activity 2 = $1.50 per direct labor hour.
Activity Rate for Activity 2 = Budgeted Cost of Activity 2 / Budgeted Activity for Activity 2
Activity Rate for Activity 2 = $60,000 / 40,000 direct labor hours
Activity Rate for Activity 2 = $1.50 per direct labor hour.
Learning Objectives
- Get acquainted with the framework and application of activity-based costing (ABC).
- Examine the impact of utilizing ABC in pinpointing products that yield profit.