Based on past experience with a client, an auditor determined performance materiality for fixed assets should be calculated at 1/4 of total materiality (5% of total gross fixed assets). Calculate performance materiality based on the following:

Fixed assets (gross) at 1/1/2017 $1,000,000

Capital expenditures 250,000

Dispositions 200,000

Accumulated depreciation at 1/1/2017 400,000

Accumulated depreciation at 12/31/2017 370,000

A.$15,625

B.$13,125

C.$8,500

D.$7,500

Can anyone provide the step-by-step calculation for this question? I searched all the website and there's no answer to it.