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Question
A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the companys three activity cost pools are shown in the following table:
| Budgeted Activity | ||||
| Activity Cost Pool | Budgeted Cost | Product A | Product B | Product C |
| Activity 1 | $70,000 | 6,000 | 9,000 | 20,000 |
| Activity 2 | $45,000 | 7,000 | 15,000 | 8,000 |
| Activity 3 | $82,000 | 2,500 | 1,000 | 1,625 |
Which of the following statements is true regarding this companys activity rates?
A. The activity rate under the activity-based costing system for Activity 2 is $2.00.
B. The activity rate under the activity-based costing system for Activity 2 is $16.00.
C. The activity rate under the activity-based costing system for Activity 2 is $1.50.
D. The activity rate under the activity-based costing system for Activity 2 is $19.50.
E. The activity rate under the activity-based costing system for Activity 2 is $2.81.
Answer
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