3.0) A company using activity based pricing marks up the direct cost of goods by

Question

3.0) A company using activity based pricing marks up the direct cost of goods by 30% plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $8.00 per order placed; $4.00 per separate item ordered; $30.00 per return. A customer places 10 orders with a total direct cost of $3,000, orders 300 separate items, and makes 5 returns. What will the customer be charged?

2.8) Match a potential cost driver with an appropriate activity pool on the right.
a. Number of setups: material receiving costs
b. Number of inspections: machine setup costs
c. Number of receipts: factory costs
d. Number of machine hours: factory costs

Explanation / Answer

3.0) A company using activity based pricing marks up the direct cost of goods by 30% plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $8.00 per order placed; $4.00 per separate item ordered; $30.00 per return. A customer places 10 orders with a total direct cost of $3,000, orders 300 separate items, and makes 5 returns. What will the customer be charged? Direct cost Markup = 30%*$3000 = $900 Indirect cost = 10Order*$8per order+300Item*$4 per item+5 return*$30 = 80+1200+150=1430 SO total cust charge will be $3000+$900+$1430 = $5330 2.8) Match a potential cost driver with an appropriate activity pool on the right. d. Number of machine hours: factory costs

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