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Activity Based Pricing

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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?

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Solution Preview

The total charge to the customer will be as follows:

Order Cost = 10*8 ...

Solution Summary

The solution computes customer overhead cost to be charged using Activity Based Pricing.