Reference: 17_05
Assume That a Pet Food Manufacturer Is Considering

Multiple Choice

Reference: 17_05
Assume that a pet food manufacturer is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 1/2pound cans.
The company identified the following partial list of activities, costs, and activity drivers expected for the next year:
$$\begin{array} { | l | c | l | } \hline \text { Activity } & \text { Expected Costs } & { \text { Cost Driver } } \\\hline \text { Handling materials } & \$ 105,000 & \text { Number of batches made } \\\hline \text { Storage costs } & \$ 820,000 & \text { Weight of Finished product } \\\hline\end{array}$$ $$\begin{array} { | l | c | c | } \hline & \text { Dog Food } & \text { Cat Food } \\\hline \text { Production volume } & 100,000\text { units } & 200,000 \text { units } \\\hline \text { Batches made } & \text { 200 batches } & 150 \text { batches } \\\hline\end{array}$$
-Refer to the data above.How much overhead cost will be assigned to each unit of product using activity-based costing (ABC) ?

A) Dog food: $4.62; cat food: $4.62.
B) Dog food: $2.64; cat food: $2.64.
C) Dog food: $8.60; cat food: $0.33.
D) Dog food: $0.26; cat food: $8.60.
E) Dog food: $0.12; cat food: $3.85.