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Q1) Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. Owner of company has given the following data concerning activity rates in its activity-based costing system:

Activity Cost Pools Activity Rate
Size- related $0.94 per guest
Complexity- related $ 31.62 per tier
Order-related $ 55.79 per order

Measure of activity for size-related activity cost pool is number of planned guests at wedding reception. Greater the number of guests, the larger the cake. Measure of complexity is the number of tiers in cake. Activity measure for order-related cost pool is number of orders. (Each wedding involves one order). Activity rates comprise the costs of raw ingredients like a flour, miniature statues and wedding bells, that are accounted for separately.

Data concerning two recent orders below:

  Pyburn wedding Smith wedding
 Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $62.75

Suppose that all of the costs given below are avoidable costs in event that order in turned down. What amount would company have to charge for pyburn wedding cake to just break even?

a) $279.87

b) $55.79

c) $29.92

d) $338.64

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918990

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