Flannery Company, a manufacturer of small appliances, had the following activities, allocated costs, and allocation bases

Question

Activities Allocated Costs Allocation Base
Account inquiry (hours) $79,000 2,700 hours
Account billing (lines) $45,000 16,000 lines
Account verification (accounts) $16,000 20,000 accounts
Correspondence (letters) $12,000 1,000 letters

The above activities are carried out at two of its regional offices.

Activities Northeast Office Midwest Office
Account inquiry (hours) 180 hours 200 hours
Account billing (lines) 10,000 lines 9,000 lines
Account verification (accounts) 1,600 accounts 650 accounts
Correspondence (letters) 60 letters 150 letters

What is the cost per letter for the correspondence activity? (Round your answer to the nearest cent.)
A) $12.00
B) $45.00
C) $4.44
D) $0.80

Answer 1

A .A)
Cost of correspondence:
Total cost of correspondence: $12,000
Quantity of allocation base (letters) 1,000
Cost of correspondence per letter ($12,000 / 1,000 ) $12.00