6 . A company using activity based pricing marks up the direct cost of goods by

Question

6.

A company using activity based pricing marks up the direct cost of goods by 40% plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $6.00 per order placed; $3.00 per separate item ordered; $28.00 per return. A customer places 10 orders with a total direct cost of $2,000, orders 300 separate items, and makes 5 returns. What will the customer be charged?

A)

$3,000

B)

$3,900

C)

$5,330

D)

$5,750

6.

A company using activity based pricing marks up the direct cost of goods by 40% plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $6.00 per order placed; $3.00 per separate item ordered; $28.00 per return. A customer places 10 orders with a total direct cost of $2,000, orders 300 separate items, and makes 5 returns. What will the customer be charged?

A)

$3,000

B)

$3,900

C)

$5,330

D)

$5,750

Explanation / Answer

Mark up on direct costs: $2,000 x 1.40 = $2,800

Indirect costs: (10 orders x $6 per order) + ($3 per separate item x 300 separate items) + (5 returns x $28 per return) ? $60 + $900 + $140 = $1,100

Total charge to the customer = $2,800 + $1,100 = $3,900

B) $3,900..............(answer)

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