Question

In: Accounting

Meade Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing...

Meade 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 $1.20 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $28.55 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $84.55 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.

Data concerning two recent orders appear below:

Ericson Wedding Haupt Wedding
Number of reception guests 74.00 257.00
Number of tiers on the cake 13.00 4.00
Cost of purchased decorations for cake $ 19.15 $ 80.84

Assuming that the company charges $707.77 for the Haupt wedding cake, what would be the overall margin on the order?

Multiple Choice

  • $587.99

  • $197.97

  • $191.64

  • $119.78

Solutions

Expert Solution

Answer:

It is given that each wedding involves one order.

Here, we are only given with sale price for Haupt wedding cake i.e.,$707.77. So, we shall compute overall margin for that order only.

Activity rates

Size-Related activity cost pool is $1.20 per guest

Complexity-Related cost pool is $28.55 per tier

Order-Related activity cost pool is $84.55 per order

For Haupt Wedding cake

Size related overhead cost assigned = Activity rate * No. of reception guests = $1.2 * 257 = $308.4

Complexity-Related cost assigned = Activity rate * No. of tiers on cake = $28.55 * 4 = $114.2

Order-Related cost assignd = Activity rate * No. of orders = $84.55 * 1 = $84.55

Cost of decoration for Haupt wedding cake = $80.84

Overall Margin on order for the Haupt wedding cake

So, the overall margin on Haupt wedding cake is $119.78.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Bevard Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing...
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 $0.95 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $31.28 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $77.41 per order. (Each wedding...
Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company...
Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost Pools Activity Rate Size-related $ 1.29 per guest Complexity-related $ 28.38 per tier Order-related $ 74.88 per order The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake....
Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company...
Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost Pools Activity Rate Size-related $ 1.13 per guest Complexity-related $ 28.22 per tier Order-related $ 74.72 per order The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake....
ABC bakery makes banana cakes on a standard costing basis. Over the past years, the company...
ABC bakery makes banana cakes on a standard costing basis. Over the past years, the company has determined a standard materials quantity allowed of 0.75 pound per piece of banana cake at a standard price agreed with suppliers at $1.5 per pound. Historically, the company has been producing 11,000 banana cakes per month. During the just concluded month May 2020, company records show 10,500 banana cakes produced with an actual cost of $13,860 with 8,400 pounds purchased and used in...
Becky’s Bakery is a small business that specializes in cakes (wedding, birthday, etc), pies, doughnuts and...
Becky’s Bakery is a small business that specializes in cakes (wedding, birthday, etc), pies, doughnuts and other confections. Some items are kept “in stock” in a display at the front of the store so customers can purchase what they want and take it right then, or customers can order cakes and other items for special events; to be delivered or picked up at a later date. Currently when an order is placed, it is written on paper and stored in...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $101,200 Number of moves 4,000 Engineering 142,400 Number of change orders 8,000 Other overhead 358,800 Direct labor hours 52,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $54,250 Number of moves 2,500 Engineering 120,700 Number of change orders 8,500 Other overhead 148,500 Direct labor hours 45,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $108,000 Number of moves 4,500 Engineering 165,000 Number of change orders 10,000 Other overhead 263,200 Direct labor hours 47,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job...
BIS 636 Becky’s Bakery is a small business that specializes in cakes (wedding, birthday, etc), pies,...
BIS 636 Becky’s Bakery is a small business that specializes in cakes (wedding, birthday, etc), pies, doughnuts and other confections. Some items are kept “in stock” in a display at the front of the store so customers can purchase what they want and take it right then, or customers can order cakes and other items for special events; to be delivered or picked up at a later date. Currently when an order is placed, it is written on paper and...
The Nougat Bakery makes cakes for freezing and subsequent sale. The bakery, which operates 6 days...
The Nougat Bakery makes cakes for freezing and subsequent sale. The bakery, which operates 6 days a week, 50 weeks a year, can produce cakes at the rate of 100 cakes per day. The bakery sets up the cake-production operation and produces until a predetermined number Q have been produced. When not producing cakes, the bakery uses its personnel and facilities for producing other bakery items. The setup cost for a production run of cakes is $600. The cost of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT