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

question 50

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 the total costs will be assigned to Department A?

• A) $90,250
• B) $90,650
• C) $90,350
• D) $90,750

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Definitions:

Profile

A description or analysis of the characteristics, qualities, or activities of a person, organization, or thing.

Net Present Value

A financial metric that calculates the present value of all cash inflows and outflows of a project or investment, using a specific discount rate.

Internal Rate

Commonly signifies the internal rate of return (IRR), identified as the discount rate that sets the net present value (NPV) of all cash flows pertaining to a specific project at zero.

Financial Analysis

The evaluation of a company's financial statements to determine its performance and make future predictions, often involving ratio and trend analysis.