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 correspondence cost will be assigned to Department P?
A)$16,000
B)$9,000
C)$8,000
D)$1,500

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 correspondence cost will be assigned to Department P?
A)$16,000 
B)$9,000 
C)$8,000 
D)$1,500

Quizplus · Accepted Answer

The correspondence activity is assigned to Department P based on the number of letters sent, which for Department P is 16,000 letters out of a total of 32,000 letters. Therefore, Department P should be assigned half of the total correspondence cost, which is $16,000.

Potter & Weasley Company Had the Following Activities, Estimated Indirect