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    Activity based costing

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    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

    © BrainMass Inc. brainmass.com June 3, 2020, 10:09 pm ad1c9bdddf
    https://brainmass.com/business/accounting/activity-based-costing-218023

    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

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