Question

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Activities Indirect Activity Costs Allocation Base Account inquiry (hours) $85,700 3600 Account billing (lines) $54,000 35,000 Account verification (accounts) $40,250 23,500 Correspondence (letters) $70,000 9000 Potter & Weasley uses activity based costing. The above activities are used by Departments P and Q as follows: ​ Department P Department Q Account inquiry (hours) 400 800 Account billing (lines) 10,000 4,000 Account verification (accounts) 5000 7000 Correspondence (letters) 1,000 2,000 How much of the account verification costs will be assigned to Department P? (Do not round intermediate calculations and round the final answer to the nearest dollar.)

Answer 1

$8,563.83

Step-by-step explanation:

The computation of the account verification costs will be assigned to Department P is shown below:

= Indirect activity cost for accounts verification × department P account verification ÷ allocation base of accounts verification

= $40,250 × 5,000 ÷ 23,500

= $40,250 × 0.2128

= $8,563.83

We simply applied the above formula