A Company Using Activity-Based Pricing Marks Up the Direct Cost

question 96

Multiple Choice

A company using activity-based pricing marks up the direct cost of goods by 30% and then adds the cost of the services that are provided.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 5 returns.What will the customer be charged?

• A)$3,000
• B)$3,900
• C)$5,330
• D)$5,759

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Definitions:

First-In, First-Out

An inventory valuation method where the costs of the oldest inventory items are assigned to cost of goods sold first, leaving the most recently purchased items in inventory.

Conversion

The process of changing or causing something to change from one form to another, often used in the context of converting raw materials into finished goods.

Department A

A designated section within an organization or factory, often referred to by its functional area or product line, involved in specific operations.

Weighted-Average Method

An inventory costing method that assigns a weighted average cost to each unit of inventory, used to calculate cost of goods sold and ending inventory.