Mertens Company provides the following ABC costing information: Total Costs Acti
ID: 2564139 • Letter: M
Question
Mertens Company provides the following ABC costing information:
Total Costs Activity-cost drivers
Account inquiry hours $200,000 10,000 Hours
Account billing lines $140,000 4,000,000 Lines
Account verification accounts$75,000 40,000 Accounts
Correspondence letters $ 25,000 4,000 Letters
Total costs $440,000
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 accounts 10,000 accounts 8,000 accounts
Correspondence letters 1,000 letters 1,600 letters
How much of the total cost will be assigned to department b?
a. $112,000
b. $79,000
c. $440,000
d. $40,000
Explanation / Answer
Answer is A
Activity Amt Activity Qty Per Basis Department B Qty Overhead Assigned Account inquiry hours 200000 10000 20 4,000.00 80,000.00 Account billing lines 140000 4000000 0.035 200,000.00 7,000.00 Account verification accounts 75000 40000 1.875 8,000.00 15,000.00 Correspondence letters 25000 4000 6.25 1,600.00 10,000.00 440000 112,000.00