Extreme Manufacturing Company provides the following ABC costing information: Activities Total Costs Activityminuscost drivers Account inquiry $750,000 15,000 hours Account billing $250,000 5,000,000 lines Account verification accounts $173,250 70,000 accounts Correspondence letters $42,000 7,000 letters Total costs $1,215,250 The above activities are used by Departments A and B as follows: Department A Department B Account inquiry hours 2,000 hours 3,500 hours Account billing lines 900,000 lines 750,000 lines Account verification accounts 9,000 accounts 7,000 accounts Correspondence letters 1,200 letters 1,600 letters How much of the total costs will be assigned to Department B?

$239,425

Explanation:

In activity based costing, cost is assigned to each department based on the activity cost contributed by the department to the company's cost pool.

Given

Activities                                    Total Costs     Activityminuscost drivers

Account inquiry                           $750,000          15,000 hours

Account billing                            $250,000         5,000,000 lines

Account verification accounts   $173,250           70,000accounts

Correspondence letters            $42,000             7,000 letters

Total costs                                  $1,215,250

The above activities are used by Departments A and B as follows:              Department                        A                   B

Account inquiry hours 2,000 hours    3,500 hours

Account billing lines   900,000 lines   750,000 lines

Account verification accounts 9,000 accounts 7,000 accounts Correspondence letters 1,200 letters 1,600 letters

total costs will be assigned to Department B

= 3500/15000 * $750,000  + 750000/5000000 * $250,000 + 7000/70000 * $173250 + 1600/7000 * $42,000

= $175,000 + $37,500 + $17,325 + $9,600

= $239,425

answer; interviews;