Premium Company Provides the Following ABC Costing Information The Above Activities Are Used by Departments a and B

question 40

Multiple Choice

Premium Company provides the following ABC costing information:
$$\begin{array} { l r c } \text { Activities } & \text { Total Costs } & \text { Activity-cost drivers } \\\text { Account inquiry } & \$ 200,000 & 10,000 \text { hours } \\\text { Account billing } & \$ 140,000 & 4,000,000 \text { lines } \\\text { Account verificationaccounts } & \$ 75,000 & 40,000 \text { accounts } \\\text { Correspondence letters } & \$ 25,000 & 4,000 \text { letters } \\\text { Total costs } & \$ 440,000 &\end{array}$$ The above activities are used by Departments A and B as follows:
$$\begin{array} { l c c } & \text { Department } \mathrm { A } & \text { Department } \mathrm { B } \\\text { Account inquiry hours } & 2,500 \text { hours } & 4,000 \text { hours } \\\text { Account billing lines } & 400,000 \text { lines } & 250,000 \text { lines } \\\text { Account verification accounts } & 10,000 \text { accounts } & 8,000 \text { accounts } \\\text { Correspondence letters } & 1,200 \text { letters } & 1,600 \text { letters }\end{array}$$
-How much of account verification costs will be assigned to Department A?

• A) $15,000
• B) $18,750
• C) $75,000
• D) $5,000

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Definitions:

Accounting

The systematic process of recording, measuring, and communicating information about financial transactions.