First Décor Has Analyzed the Indirect Costs Associated with Servicing

question 76

Multiple Choice

First Décor has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability.Results for the year appear below: $\begin{array}{lrlr}\hline \text { Cost Pool } & \text { Cost } & \text { Cost Driver } & \text { Quantity } \\\hline \text { Processing electronic orders } & \$ 400,000 & \text { N umber of orders } & 40,000 \\\text { Processing non-electronic orders } & 120,000 & \text { N umber of orders } & 8,000 \\\text { Picking orders } & 240,000 & \text { N umber of different products ordered } & 120,000 \\\text { Packaging orders } & 180,000 & \text { N umber of items ordered } & 150,000 \\\text { Returns } & 15,000 & \text { Number of returns } & 3,000\end{array}$ If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered?

• A)$6.37
• B)$33.20
• C)$1.20
• D)$0.16

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Definitions:

Leader-Follower Transactions

Interactions between leaders and followers where leadership is exercised based upon an exchange process, where compliance by the follower is rewarded by the leader.

Transformational

Relating to or causing a significant change or shift in something, especially in a way that makes it better or more effective.

Transactional

An approach or interaction primarily focused on exchanges or transactions, often emphasizing efficiency and short-term gains.

Social Exchange Theory

A conceptual framework suggesting that social behavior is the result of an exchange process, aiming to maximize benefits and minimize costs in relationships.