Merriman Company provides the following ABC costing information: Activities Acco

Question

Merriman Company provides the following ABC costing information: Activities Account inquiry hours Accounting billing lines Account verification accounts $150,000 Correspondence letters $50,000 Total costs The above activities used by Departments A and B as follows: Total Costs $400,000 Activity cost drivers 10,000 hours $280,000 4,000,000 lines 40,000 accounts 4,000 letters $880,000 Dept. A. Dept. B 2,000 hours 400,000 lines 4,000 hours 200,000 lines Account inquiry hours Accounting billing lines Account verification accounts 10,000 accounts Correspondence letters How much of the account inquiry cost will be assigned to Dept. A.? 8,000 accounts 1,600 letters 1,000 letters a. None of the answers provided are correct. b. $400,000 C. $80,000 o d. $160,000

Explanation / Answer

So, answer is C. $80,000

Total account enquiry costs $ 400,000 Total account enquiry hours        10,000 Account enquiry cost per hour ($400,000/10,000) $            40 Account enquiry costs for dept. A ($40*2,000) $    80,000

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