Flannery Company, a manufacturer of small appliances, had the following activities, allocated costs, and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) $ 77 comma 000 2 comma 600 hours Account billing (lines) $ 38 comma 000 19 comma 000 lines Account verification (accounts) $ 20 comma 000 30 comma 000 accounts Correspondence (letters) $ 14 comma 000 1 comma 600 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 100 hours 200 hours Account billing (lines) 10 comma 000 lines 9 comma 000 lines Account verification (accounts) 1 comma 000 accounts 650 accounts Correspondence (letters) 50 letters 110 letters What is the cost per letter for the correspondence activity? (Round your answer to the nearest cent.)

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.

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