A company using activity based pricing marks up the direct cost of goods by 39%

Question

A company using activity based pricing marks up the direct cost of goods by 39% 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 $2,210, orders 312 separate items, and makes 8 returns. What will the customer be charged?

A)

$3,000

B)

$4,292

C)

$5,330

D)

$5,755

A company using activity based pricing marks up the direct cost of goods by 39% 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 $2,210, orders 312 separate items, and makes 8 returns. What will the customer be charged?

A)

$3,000

B)

$4,292

C)

$5,330

D)

$5,755

Explanation / Answer

The customer pays The below:

Direct costs= 2210 * 1.39 = 3071.90

Indirect costs: 6 * 10 = $60

Seperate items - Indirect Cost = 3*312 = $936

Returns - Indirect Cost = 8*28 = 224

Total Costs = 3071.90 + 60 + 936 + 224 = 4,291.90 = $4,292

Answer : Option B: $4,292

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