Alexander Inc. uses activity-based costing. The company produces two products: Snaps and Pops. The expected annual production of Snaps is 1,500 units, while the expected annual production of Pops is 2,200 units. There are three activity cost pools: Assembly, Testing, and Packing. The estimated costs and activities for each of these three activity pools follows: The cost pool activity rate for Testing would be
A)$21.43 per activity.
B)$13.90 per activity.
C)$39.56 per activity.
D)$6.95 per activity.

Question

Alexander Inc. uses activity-based costing. The company produces two products: Snaps and Pops. The expected annual production of Snaps is 1,500 units, while the expected annual production of Pops is 2,200 units. There are three activity cost pools: Assembly, Testing, and Packing. The estimated costs and activities for each of these three activity pools follows:  The cost pool activity rate for Testing would be
A)$21.43 per activity. 
B)$13.90 per activity. 
C)$39.56 per activity. 
D)$6.95 per activity.

Quizplus · Accepted Answer

To calculate the activity cost rate, we divide the estimated activity cost of each pool by the total estimated activity cost of that pool. For Testing, the activity cost rate would be:
($18,900 / 1,360) = $13.90 per activity.