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Activity based costing

Paris Company provides the following ABC costing info:

Activities Total Costs Activity-Cost Drivers
account inquiry hours $400,000 10,000 hours
account billing lines 280,000 4,000,000 lines
account verification 150,000 40,000 accounts
correspondence letters 50,000 4,000 letters
Total costs $880,000

The above activities are used by Departments A and B as follows:

Department A Department B
account inquiry hours 2,000 hours 4,000 hours
account billing lines 400,000 lines 200,000 lines
account verification 10,000 accounts 8,000 accounts
correspondence letters 1,000 letters 1,600 letters

How much of the account inquiry cost will be assigned to Department A?
a. $80,000 c. $160,000
b. $400,000 d. none of these

How much of the account billing cost will be assigned to Department B?
a. $28,000 c. $14,000
b. $280,000 d. none of these

Solution Preview

Hi,

Please see the response to your posting as below:

How much of the account inquiry cost will be assigned to Department A?

Activity rate account inquiry cost = Total inquiry cost / total activity cost ...

Solution Summary

Solution shows calculation of cost assigned to different department under activity based costing.

$2.19