Nick Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:

Expected Activity

Activity Cost Pool Estimated Costs Product A Product B Total

Activity 1 $32,600 700 300 1,000Activity 2$17,600600 200 800Activity 3 $52,500 400100500

The activity rate under the activity-based costing system for Activity 3 is closest to:

Answer
a. $44.65
b. $105.00
c. $525.00
d. $205.00

b. $105.00

Explanation:

The computation of the activity rate under the activity-based costing system  is shown below:

For Activity 3,

The activity rate is

= Estimated cost ÷ Estimated activity

= $52,500 ÷ 500

= $105

We simply divided the estimated cost by the estimated activity to get the activity rate

All other information which is given is not considered. Hence, ignored it

the correct answer is:

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