Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
How much of the account inquiry cost will be assigned to Department Q?
A)$6,400
B)$25,600
C)$12,800
D)$8,000

Question

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases:  Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
 How much of the account inquiry cost will be assigned to Department Q?
A)$6,400 
B)$25,600 
C)$12,800 
D)$8,000

Quizplus · Accepted Answer

To allocate the account inquiry cost to Department Q, we need to use the allocation rate of the account inquiry activity, which is calculated as follows:
Account inquiry rate = $64,000 / 40,000 inquiries = $1.6 per inquiry
Department Q had 16,000 inquiries, so the cost assigned to Department Q for account inquiry would be:
Account inquiry cost for Department Q = 16,000 inquiries × $1.6 per inquiry = $25,600
Therefore, the answer is B.

Potter & Weasley Company Had the Following Activities, Estimated Indirect