1.A law firm uses activity-based pricing. The company%u2019s activity pools are
ID: 2376697 • Letter: 1
Question
1.A law firm uses activity-based pricing. The company%u2019s activity pools are as follows:
Cost Pool
Annual Estimated Cost
Cost Driver
Annual Driver Quantity
Consultation
200,000
Number of consultations
100 consultations
Administrative Costs
150,000
Admin labor hours
10,000 labor hours
Client Service
99,000
Number of clients
110 clients
The firm had two consultations with this client and required 130 administrative labor hours. What additional costs will be charged to this customer?
2. Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results appear below:
Cost Pool
Annual Cost
Cost Driver
Annual Driver Quantity
Processing electronic orders
$1,000,000
Number of orders
500,000
Processing non-electronic orders
$2,000,000
Number of orders
400,000
Picking orders
$3,000,000
Number of different products ordered
800,000
Packaging orders
$1,500,000
Number of items ordered
50,000,000
Returns
$2,000,000
Number of returns
50,000
If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered?
3. The chief engineer at Tech Deals has proposed production of a high-tech portable electronic storage device to be sold at a 30 percent markup above its full cost. Management estimates that the fixed costs per year will be $160,000. The quantity demanded is 40,000 units. How much is the price with a 30 percent markup?
PLEASE PROVIDE CALCULATION FOR ALL ANSWERS! THANKS!
Cost Pool
Annual Estimated Cost
Cost Driver
Annual Driver Quantity
Explanation / Answer
Hi,
Please find the answer as follows:
Part A:
Additional Costs = 2*200000/100 (Additional Consultation Cost) + 150000*130/100000 (Additional Administrative Cost) = 5950
Part B:
Cost Per Unit of Item Ordered = Total Cost/Number of Items Ordered = 9500000/50000000 = .19
Part C:
Information is not complete/sufficient to answer the question.
Thanks.
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