A custom yacht-building company uses activity-based pricing.The company's annual activity pools and related information follow: $\begin{array}{lrlr}\text { Cos tPool } &\text { Estimated Cost } &\text { Cost Driver } & \text { Driver Quantity}\\hline
\text { Design } & \$ 2,500,000 & \text { Number of designs } & 80 \text { designs } \
\text { Production } & 4,000,000 & \text { Labor hours } & 125,000 \text { labor hours } \
\text { Customer service } & 80,000 & \text { Number of customers } & 20 \text { customers }
\end{array}$ The pricing structure is to charge customers for the cost of the services that are provided.One particular customer requested 2 different designs which led to the production of one yacht which took 2,400 labor hours to complete.What additional costs will be charged to this customer?
A)$143,300
B)$112,050
C)$139,300
D)$108,050

Question

A custom yacht-building company uses activity-based pricing.The company's annual activity pools and related information follow: $\begin{array}{lrlr}\text { Cos tPool  } &\text { Estimated Cost } &\text { Cost Driver } & \text { Driver Quantity}\\hline
\text { Design } & \$ 2,500,000 & \text { Number of designs } & 80 \text { designs } \
\text { Production } & 4,000,000 & \text { Labor hours } & 125,000 \text { labor hours } \
\text { Customer service } & 80,000 & \text { Number of customers } & 20 \text { customers }
\end{array}$ The pricing structure is to charge customers for the cost of the services that are provided.One particular customer requested 2 different designs which led to the production of one yacht which took 2,400 labor hours to complete.What additional costs will be charged to this customer?
A)$143,300
B)$112,050
C)$139,300
D)$108,050

Quizplus · Accepted Answer

The cost of the services provided to the customer is the sum of the cost of the designs and the cost of production. The cost of the designs is $2,500,000 / 80 designs * 2 designs = $62,500. The cost of production is $4,000,000 / 125,000 labor hours * 2,400 labor hours = $76,800. The total cost of the services provided to the customer is $62,500 + $76,800 = $139,300.

A Custom Yacht-Building Company Uses Activity-Based Pricing The Pricing Structure Is to Charge Customers for the Cost