1. Republic Industries decides to price delivery services according to the results of a recent activity-based costing (ABC) study. The study indicates Republic should charge $8 per order, 3% of annual order value for general delivery costs, $1.30 per item, and $30 for delivery.

A year later, Republic collected the following information for two of its best customers:

Cost driver	Customer C				Customer D
Number of orders		17				8
Number of deliveries		10				10
Total number of items		3,000				6,000
Annual order value	$	160,000			$	85,000

What are the total delivery costs charged to Customer D during the year?

Multiple Choice

• $10,650.

• $9,136.

• $10,714.

• $8,164.

2. Damon Industries manufactures 15,000 components per year. The manufacturing costs of the components was determined as follows:

Direct materials	$	129,000
Direct labor		20,500
Variable manufacturing overhead		60,000
Fixed manufacturing overhead		80,000

An outside supplier has offered to sell the component for $16. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,600. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:

Multiple Choice

• $37,900 decrease.

• $78,900 increase.

• $42,100 increase.

• $18,900 decrease.