(Activity-based costing and pricing) Steven Haws owns and manages a commercial cold-storage warehouse. He stores a vast variety of perishable goods for his customers. Historically, he has charged customers using a flat rate of $.04 per pound per month for goods stored. His cold-storage warehouse has 100,000 cubic feet of storage capacity.

In the past 2 years, Haws has become dissatisfied with the profitability of the warehouse operation. Despite the fact that the warehouse remains relatively full, revenues have not kept pace with operating costs. Recently, Haws ap¬ proached his accountant, Jill Green, about using activity-based costing to im¬ prove his understanding of the causes of costs and revise the pricing formula. Green has determined that most costs can be associated with one of four activ¬ ities. Those activities and their related costs, volume measures, and volume levels lor 1997 follow:

a.Based on the activity cost and volume data, determine the amount of cost assigned to the following customers, whose goods were all received on the first day of last month.

b. Determine the price to be charged to each customer under the existing pric¬ ing plan.

c. Determine the price to be charged using ABC, assuming Haws would base the price on the cost determined in part a plus a markup of 40 percent.

d. How well does Haws’s existing pricing plan capture the costs incurred to provide the warehouse services? Explain.LO1

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ACTIVITY COST Send/receive goods $6,000 Store goods 4,000 Move goods 5,000 Identify goods 2,000 MONTHLY VOLUME MEASURE Weight in pounds-500,000 Volume in cubic feet-80,000 Volume in square feet-5,000 Number of packages-500