Activity-based costingCould you please help me explain how the ABC is useful for pricing decisions? Thanks!

If your product is off-the-shelf type, then the cost of
manufacturing that product is the same. But then depending upon the customer's behavior,
the resources consumed by the customer is different. for example the # of changes in the
schedule, special packing request, # of orders, payment schedule etc. This makes the
profitability of the customer different if the price of the product is
same.

Activity Based Costing helps the organization to
understand the cost-to-serve the cutomer, based on their behavior and correspnding
consumption of the resources. Based on this information the organization may decide a
differential pricing strategy for differnt customers. Their could also be a
'menu-based-pricing' adopted by the organizaion.

For
example a bank may say that if your average monthly balance is below 10000 then you can
visit the branch only once in a month, trhice to ATM etc., for free. Any additional
visit may be cahrged.

Pricing is in any case a decision
taken by the organization, ABC helps the organization to understand the relevant and
appropriate costs of the behavior of the people in the organization and of the customer.
This in turn helps to understand the profitability of the products, customers etc.