Triumph Corporation has told Julius Company that it will be switched to an activity-based pricing system or it will be dropped as a customer. In addition to regular prices, Julius will be required to pay:

Order processing (per order) $11

Additional handling cost if order marked rush (per order)$20

Technical support calls (per call) $21

Question a) Calculate the profitability of the Julius Company account if activity is the same as in the prior year.

Question b) Is it realistic to expect Julius Company's activity to be the same this year as the previous year if activity-based pricing is instituted? How might Julius Company react to the new pricing scheme? How might its order behavior change as a result of the new fees?

Additional Info needed:

Order processing cost per order $9

Additional cost if order must be expedited (rushed)$11

Customer technical support calls (per call) $13

Relationship management cost (per customer per year) $1800

In addition to these cost, product cost amount to 80% of sales. In the prior year, Triumph had the following experience with one of its customers, Julius Company:

Sales $22,000

number of orders 170

Percent of orders marked rush 80%

calls to technical support90