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.

Question

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:
$$\begin{array} { l r r r } 
{ \text { Cost driver } } & \text { Customer A } & \text { Customer B } & \text { Customer C } \
\text { Number of orders } & 18 & 8 & 12 \
\text { Number of deliveries } & 10 & 10 & 24 \
\text { Total number of items } & 2,000 & 4,000 & 12,000 \
\text { Annual order value } & \$ 120,000 & \$ 80,000 & \$ 100,000
\end{array}$$
-
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.

Quizplus · Accepted Answer

The total delivery costs for Customer C are calculated as follows:  - Order cost: 12 orders x $16 = $192  - General delivery cost: 1% of $100,000 = $1,000  - Item cost: 12,000 items x $2.50 = $30,000  - Delivery cost: 24 deliveries x $45 = $1,080  Total cost = $192 + $1,000 + $30,000 + $1,080 = $32,272.

Express Travel Decides to Price Delivery Service According to the Results