Bevard Nuptial Bakery makes very elaborate wedding cakes to order. The company h
ID: 2460632 • Letter: B
Question
Bevard Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing system with three activity cost pools. The activity rate for the Size-Related activity cost pool is $1.33 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $35.93 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $87.14 per order. (Each wedding involves one order for a cake.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Euertz wedding cake to just break even?
$17.20
$681.52
$87.14
$629.93
Bevard Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing system with three activity cost pools. The activity rate for the Size-Related activity cost pool is $1.33 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $35.93 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $87.14 per order. (Each wedding involves one order for a cake.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Explanation / Answer
Calcultion of Cost of Euertz wedding cake In Nos. Activity Rate in $ Total in $ Reception guest cost 71 1.33 94.43 Cake cost 12 35.93 431.16 Order cost 1 87.14 87.14 Cost of decoration for cake 17.2 Total cost 629.93 The company have to charge $629.93 for the Euertz wedding cake to just break even
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