Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?

$3.00

Explanation:

Calaculation of the approximate overhead cost per unit of Product A under activity-based costing:

The first step is to calculate for the Activity 1 allocated to Product A line which is :

$87,000 × 3,000/5,800

=$261,000,000/5,800

=$45,000

The second step is to calaculate for Activity 2 allocated to Product A line which is :

$62,000 × 4,500/10,000

$279,000,000/10,000

=$27,900

The third step is to calculate for Activity 3 allocated to Product A line which is :

$93,000 × 2,500/7,750

=$232,500,000/7,750

=$30,000

The total overhead allocated to Product A

$45,000+$30,000+$27,900

= $102,900

Overhead per unit of Product A: $102,900/Annual production of 34,300 units

= $3.00

Therefore the approximate overhead cost per unit of Product A under activity-based costing will be $3.00

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