FIN Question 8

Hinckley & Granger Company had the following activities, estimated indirect activity costs, and allocation bases:

Activities	Indirect Activity Costs	Allocation Base
Account inquiry (hours)	$75,000	2,500
Account billing (lines)	$45,000	30,000
Account verification (accounts)	$18,000	24,000
Correspondence (letters)	$40,000	4,000

Hinckley & Granger uses activity based costing. The above activities are used by Departments P and Q as follows:

	Department P	Department Q
Account inquiry (hours)	300	600
Account billing (lines)	8,000	6,000
Account verification (accounts)	5,000	4,500
Correspondence (letters)	500	600

How much of the correspondence cost will be assigned to Department P?

		$375
		$5,000
		$3,750
		$6,000