Question

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$1.33per guest Complexity-related$28.42per tier Order-related$74.92per 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. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) 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: Tijerina WeddingTwersky Wedding Number of reception guests 54 129 Number of tiers on the cake 2 4 Cost of purchased decorations for cake$29.30$54.84 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 Tijerina wedding cake to just break even

Answer 1

To break even on the Tijerina wedding cake, Nissley Wedding Fantasy Corporation must charge at least $232.88, which is the sum of the size-related, complexity-related, order-related, and decoration costs.

Step-by-step explanation:

To calculate the total cost for the Tijerina wedding cake, we need to consider all avoidable costs associated with producing the cake. First, we calculate the size-related cost by multiplying the per guest rate ($1.33) by the number of guests (54), resulting in $71.82. Next, we consider the complexity-related cost, which is $28.42 per tier, and since the cake has 2 tiers, this equals $56.84. The order-related cost is a flat rate of $74.92 per order. Finally, we add the cost of purchased decorations, which is $29.30 for the Tijerina wedding.

The total cost is the sum of size-related, complexity-related, order-related, and decoration costs: $71.82 (size) + $56.84 (complexity) + $74.92 (order) + $29.30 (decorations) = $232.88. Therefore, to break even, Nissley Wedding Fantasy Corporation would need to charge at least $232.88 for the Tijerina wedding cake.

Answer 2

$230.02

Step-by-step explanation:

Calculation for what amount would the company have to charge for the Tijerina wedding cake to just break even

Size related $69.16

($1.33 per guest × 52 guests)

Complexity-related $56.84

($28.42 per tier × 2 tiers)

Order-related $74.72

($74.92 per order × 1 order)

Cost of purchased decorations for cake $29.30

Total cost $230.02

($69.16+$56.84+$74.72+$29.30)

The amount that the company would have to charge for the Tijerina wedding cake to just break even will be $230.02