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Management Cases

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Chapter 5

Activity-Based Costing and Customer Profitability Analysis

Cases

|5-1 |Blue Ridge Manufacturing (Activity-Based Costing for Marketing Channels) |
|5-2 |Columbo Soft-Serve Frozen Yogurt: Using Activity Based Costing To Assess Channel/Customer Profitability |
|5-3 |Wilson Electronics (A) |
|5-4 |Wilson Electronics (B) |
|5-5 |The Buckeye National Bank (ABC Costing in the Service Sector) |
|5-6 |Precision Paint |
|5-7 |Forest Hill Paper Company |
| | |

Readings

5-1: “Activity-Based Costing and Predatory Pricing: The Case of the Petroleum Retail Industry” by Thomas L Burton and John B MacArthur, Management Accounting Quarterly, (Spring 2003).

The assignment of indirect costs in a volume-based costing system can lead to product-cost subsidization—overcost high-volume products and undercost low-volume products. Undercosted products can lead to the appearance of predatory pricing where it actually does not exist. This article focuses on a lawsuit brought against a major chain of retail motor fuel (gasoline) service centers for allegedly selling regular-grade gasoline below cost, as defined by state statutes. The defendant employed ABC analysis to support its position that it was not selling

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