Express Travel Decides to Price Delivery Service According to the Results

question 142

Multiple Choice

Express Travel decides to price delivery service according to the results of a recent activity-based costing (ABC) study. The study indicates Express Travel should charge $16 per order, 1% of annual order value for general delivery costs, $2.50 per item, and $45 for delivery.
A year later, Express Travel collected the following information for three of its customers:
$$\begin{array} { l r r r } { \text { Cost driver } } & \text { Customer A } & \text { Customer B } & \text { Customer C } \\\text { Number of orders } & 18 & 8 & 12 \\\text { Number of deliveries } & 10 & 10 & 24 \\\text { Total number of items } & 2,000 & 4,000 & 12,000 \\\text { Annual order value } & \$ 120,000 & \$ 80,000 & \$ 100,000\end{array}$$
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What are the total delivery costs charged to Customer C during the year?

• A) $16,863.
• B) $20,000.
• C) $31,272.
• D) $32,272.

Understand pricing strategies within capacity-constrained settings, including strategies for maximizing revenue.

Grasp the basic principles of marginal revenue and marginal cost in different operational contexts.

Understand the relationship between demand uncertainty and pricing strategy.

Analyze strategies to minimize product cannibalization.

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