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AIP 4.12 Pricing and Activity-Based Costing LO 1, 2,9 The Mittelberg Paper Company purchases large rolls of paper from paper manufacturers. The company then cuts and packages the paper to meet the demand of small printing companies. The company uses ABC to determine the cost of the product and then charges the printing companies an additional 20 percent for profit. The price calculation for a recent order looked like the following: Activity Application Rate Usage of Cost Driver Cost Cutting 5/cut 30 cuts 150 Packaging 1/package 200 packages Storing 0.60/package 200 packages 200 120 178 40 40 300 840 Delivery 4/kilometer 10 kilometers Administration 40/order 1 order Total activity costs 540 Raw materials Total cost Profit (0.20)(840) Price 1,008 The customer is not happy with the price and threatens to change suppliers. How should the Mittelberg Company re-examine its activities, the relation with its customer, and its pricing process? 168