Question:
Acklin Company has two products: A and B. Annual production and sales are 600 units of Product A and 900 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor hours per unit and Product B requires 0.3 direct labor hours per unit. The total estimated overhead for next period is $63,322. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory- with estimated overhead costs and expected activity as follows:
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Estimated
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Overhead
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Expected Activity
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Activity Cost Pool
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Cost
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Product A
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Product B
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Total
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Activity 1
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$18,900
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700
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200
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900
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Activity 2
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15,631
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1,000
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100
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1,100
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General factory
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28,791
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300
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270
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570
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Total
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$63,322
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The overhead cost per unit of Product A under the activity-based costing system is closest to:
A) $25.26
B) $73.44
C) $42.21
D) $55.55