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Trang Company had the following activities, allocated costs, and allocation base

ID: 2456713 • Letter: T

Question

Trang Company had the following activities, allocated costs, and allocation bases:

Activities

Allocated Costs

Allocation Base

Account inquiry (hours)

$60,000

2,000 hours

Account billing (lines)

$30,000

20,000 lines

Account verification (accounts)

$15,000

20,000 accounts

Correspondence (letters)

$10,000

1,000 letters

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

Northeast Office

Midwest Office

Account inquiry (hours)

100 hours

200 hours

Account billing (lines)

10,000 lines

7,000 lines

Account verification (accounts)

1,000 accounts

600 accounts

Correspondence (letters)

50 letters

100 letters

What is the cost per line to Trang for the account billing activity?

A) $1.50

B) $30.00

C) $1.60

D) $1.43

Activities

Allocated Costs

Allocation Base

Account inquiry (hours)

$60,000

2,000 hours

Account billing (lines)

$30,000

20,000 lines

Account verification (accounts)

$15,000

20,000 accounts

Correspondence (letters)

$10,000

1,000 letters

Explanation / Answer

Cost per line for account billing Activity = $30000/20000 =$1.50

Thus answer is (A) $1.50

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