A 20-ounce bottle of Dasani water typically costs about $0.99 at a convenience store. At an airport shop, that same bottle of Dasani water could cost $2.89 or more. The costs of operating airport shops can be more expensive than other retail locations for a few reasons. Off-airport warehouses are needed due to limited inventory space. In addition, deliveries to stores inside airports are usually made during off-peak hours. Finally, deliveries must be made in small batches so that everything can go through airport security screening.

1. Would the cost of an off-airport warehouse be classified as a unit-level, batch-level, product-level, or facility-level cost as it relates to

a. The airport store

b. An individual bottle of water

2. Would the cost of delivery of two cases of Dasani water to the store inside the airport from the off-airport warehouse be classified as a unit-level, batch-level, product-level, or facility-level cost as it relates to (consider each cost you listed in the first requirement separately):

a. The airport store

b. An individual bottle of water

3. Would the airport store be likely to use the ABC cost for water bottle pricing? Why or why not?

4. Would activity-based costing or activity-based management be useful for the airport store? Why or why not?