Problem:
Activity-based costing (ABC) is a system that gathers overhead costs for organization activities, and then assigns those costs back to products, services, departments, sales territories or other cost objects. La Villa Roma Pizza wants to determine the cost of delivering pizzas to clients. The company is considering whether to charge a small fee for deliveries.
Explain the cost object, key activities, and related cost drivers for La Villa Roma's activity-based cost study. When dealing with activity-based costing, what types of ethical decisions might you face?