Answer:
Cost per letter for the correspondence activity= $ 8.75
Explanation:
Flannery Company
Given
Activities Allocated Costs Allocation Base
Account inquiry (hours)$ 77, 000 2,600 hours
Account billing (lines) $ 38, 000 19,000 lines
Account verification (accounts) $ 20,000 30,000 accounts
Correspondence (letters) $ 14,000 1, 600 letters
Activities Northeast Office Midwest Office
Account inquiry (hours) 100 hours 200 hours
Account billing (lines) 10,000 lines 9,000 lines
Account verification (accounts) 1 ,000 accounts 650 accounts
Correspondence (letters) 50 letters 110 letters
Calculations
Cost per letter for the correspondence activity= Total Correspondence/ Total No of letters
Cost per letter for the correspondence activity= 14000/1600= 8.75
Cost per letter for the correspondence activity= $ 8.75
We divide the activity cost with the corresponding cost driver to get the cost per unit of activity.
