Question

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. Using activity-based costing, calculate the appropriate activity rate(s). Multiple choice question. $8 per customer call and $15 per development hour $20 per customer call and $25 per development hour $11.11 per customer call or per development hour

Answer 1

$8 per customer call and $15 per development hour

Step-by-step explanation:

The computation of the activity rates is shown below:

For customer service

= $200,000 ÷ 25,000

= $8 per customer call

and for product development, the activity rate is

= $300,000 ÷ 20,000

= $15 per development hour

Hence, the first option is correct

ANd, the same is to be considered and relevant