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### A company using activity based pricing marks up the direct cost of goo.docx

1. A company using activity based pricing marks up the direct cost of goods by 43% 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 6 returns. What will the customer be charged? A company using activity based pricing marks up the direct cost of goods by 43% 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 6 returns. What will the customer be charged? Solution Total Direct Cost = \$ 3,000 Markup thereon = 3,000 X 43% = \$ 1,290 Hence, base sales price = \$ 4,290 Additional Indirect Costs For Orders = 10 X 8 = \$ 80 For Separate Items = 300 X 4 = \$ 1,200 For Returns made = 6 X 30 = \$ 180 Hence, the total amount to be charged to the customer = \$ 4,290 + \$ 80 \$ 1,200 + \$ 180 = \$ 5,750
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