Jennifer Company has two products: A and B. The company uses activity-based costing. The total cost and activity for each of the company's three activity cost pools are as follows: The activity rate under the activity-based costing system for Activity 3 is closest to:
A)$36.24
B)$38.44
C)$84.56
D)$115.33

Question

Jennifer Company has two products: A and B. The company uses activity-based costing. The total cost and activity for each of the company's three activity cost pools are as follows:  The activity rate under the activity-based costing system for Activity 3 is closest to:
A)$36.24 
B)$38.44 
C)$84.56 
D)$115.33

Quizplus · Accepted Answer

Activity 3 has a total cost of $34,600 and an activity of 900. Therefore, the activity rate is $34,600 ÷ 900 = $38.44 per unit of activity. This means that for every unit of Activity 3 used, $38.44 of cost should be allocated to the products that use that activity. The other answer choices are not correct because they do not reflect the calculation for the activity rate under activity-based costing.

Jennifer Company Has Two Products: a and B