Pitt Jones Company had the following activities, allocated costs, and allocation bases: \[\begin{array} { | l | l | l | } \hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \\ \hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \\ \hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \\ \hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \\ \hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \\ \hline \end{array}\] The above activities are used by departments P and Q: \[\begin{array} { | l | l | l | } \hline & \text { Department P } & \text { Department Q } \\ \hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \\ \hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \\ \hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \\ \hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \\ \hline \end{array}\] What is the cost per driver unit for the account inquiry activity?

A) $0.75 B) $30.00 C) $10.00 D) $1.50 A) $0.75 B) $30.00 C) $10.00 D) $1.50

Pitt Jones Company had the following activities, allocated costs, and allocation bases: \[\begin{array} { | l | l | l | } \hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \\ \hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \\ \hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \\ \hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \\ \hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \\ \hline \end{array}\] The above activities are used by departments P and Q: \[\begin{array} { | l | l | l | } \hline & \text { Department P } & \text { Department Q } \\ \hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \\ \hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \\ \hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \\ \hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \\ \hline \end{array}\] How much of the correspondence cost will be assigned to Department P?

A) $500 B) $1,200 C) $2,500 D) $800 A) $500 B) $1,200 C) $2,500 D) $800

Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June: \[\begin{array} { | l | l | l | l | } \hline \text { Activity } & \begin{array} { l } \text { Estimated Indirect } \\ \text { Activity Costs } \end{array} & \text { Allocation Base } & \begin{array} { l } \text { Estimated Quantity of } \\ \text { Allocation Base } \end{array} \\ \hline \text { Materials handling } & \$ 3,150 & \text { Number of parts } & 4,200 \text { parts } \\ \hline \text { Assembling } & \$ 13,860 & \text { Number of parts } & 4,200 \text { parts } \\ \hline \text { Packaging } & \$ 2,730 & \text { Number of pillows } & 1,050 \text { pillows } \\ \hline \end{array}\] Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50. If the cost to purchase the same pillow from a supplier is $21.00, what should Sleep Tight do to maximize profits?

A) Continue to manufacture the pillow. B) Since the cost to manufacture the pillow is also $21.00, the company would make the same profit whether it bought the pillow or manufactured it. C) Purchase the pillow from the supplier. D) Close down the business. A) Continue to manufacture the pillow. B) Since the cost to manufacture the pillow is also $21.00, the company would make the same profit whether it bought the pillow or manufactured it. C) Purchase the pillow from the supplier. D) Close down the business.