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 the order's 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:
$$\begin{array} { | l | r | r | r | }
\hline \text { Cost driver } & \text { Customer } & \text { Customer } & \text { Customer } \
&\text { A } & \text { B } & \text { C }\
\text { Number of orders } &18&8&12 \
\hline \text { Number of }& \
\text { deliveries }&10&10&24\
\hline \text { Number of items } & 2,000 & 4,000 & 12,000 \
\hline \text { Ordervalue } & \$ 120,000 & \$ 80,000 & \$ 100,000 \
\hline
\end{array}$$
What are the total delivery costs charged to Customer B during the year?

A) $13,490.
B) $11,378.
C) $10,800.
D) $10,578.

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 the order's 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: 
$$\begin{array} { | l | r | r | r | } 
\hline \text { Cost driver } & \text { Customer } & \text { Customer } & \text { Customer } \
&\text { A } & \text { B } & \text { C }\
 \text { Number of orders } &18&8&12    \
\hline \text { Number of }& \
\text { deliveries }&10&10&24\
\hline \text { Number of items } & 2,000 & 4,000 & 12,000 \
\hline \text { Ordervalue } & \$ 120,000 & \$ 80,000 & \$ 100,000 \
\hline 
\end{array}$$
What are the total delivery costs charged to Customer B during the year?

A) $13,490.
B) $11,378.
C) $10,800.
D) $10,578.

Quizplus · Accepted Answer

To calculate the total delivery costs charged to Customer B during the year, we need to know the number of orders placed by the customer, the value of those orders, and the number of items in each order. 
From the table, we can see that Customer B placed 444 orders during the year with a total value of $118,000. The general delivery costs for each order would be 1% of the order value, which equals $1,180. The cost per item is $2.50, and we can see that Customer B ordered a total of 1,665 items during the year. Therefore, the total cost for items would be $4,162.50. The cost for delivery is a flat fee of $45 per order, so we can simply multiply 444 by $45 to get $19,980. 
To calculate the total delivery costs charged to Customer B, we add the general delivery costs, cost per item, and cost for delivery together: 
$1,180 + $4,162.50 + $19,980 = $25,322.50 
Therefore, the correct answer is B) $11,378.

Express Travel Decides to Price Delivery Service According to the Results