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Nick 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: Total Activity Activity Cost Pool Total Cost Product A Product B Total Activity 1 $ 32,600 700 300 1,000 Activity 2 $ 17,600 600 200 800 Activity 3 $ 52,500 400 100 500 The activity rate under the activity-based costing system for Activity 3 is closest to:

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TomShelby

Answer:

activity 3 rate = $105

Explanation:

Activity 3 $ 52,500 400 100 500

To know the rate we will do

[tex]\frac{Activity\: Cost \: Pool}{Activity}= Activity\:Rate[/tex]

In this case:

cost pool = 52,500

activity = 500

rate = 52,500 / 500 = 105

Then we do:

Product A level x rate = applied overhead

400 x 105 = 42,000

Product B level x rate = applied overhead

100 x 105 = 10,500

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