EXERCISE 8-9. Activity-Based Pricing Refer to the information in Exercise 8. For the coming year, Delta Products has told Johnson Brands that it will be switched to an activity-based pricing system or it will be dropped as a customer. In addition to regular prices, Johnson will be required to pay:

Price Order processing (per order) $ 6.00 Additional handling costs if order marked rush (per order) 10.00 Customer service calls (per call) 1 5.00 Required

a. Calculate the profitability of the Johnson Brands account if activity is the same as in the prior year.

b. Assume that Johnson Brands decides to accept the activity-based pricing system offered by Delta Products. What changes will likely be made by Johnson?