Question

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 $1.15 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $36.42 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $86.41 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 WeddingHaupt Wedding Number of reception guests 76.00 254.00 Number of tiers on the cake 4.00 5.00 Cost of purchased decorations for cake$17.85$73.45 Assuming that the company charges $718.12 for the Haupt wedding cake, what would be the overall margin on the order

Answer 1

Overall margin is $84.15

Step-by-step explanation:

Given that:

For Haupt wedding, Cost of purchased decorations for cake = $73.45

Charges for the Haupt wedding cake = $718.21

The activity rate for the Size-Related activity cost pool = $1.15 per guest.

The activity rate for the Complexity-Related cost pool = $36.42 per tier

The activity rate for the Order-Related activity cost pool = $86.41 per order

Number of order = 1

Number of guest for Haupt wedding = 254 guest

Number of tiers used for Haupt cake = 5 tiers

Therefore:

Size related cost = $1.15 per guest × 254 guest = $292.1

Complexity-Related cost = $36.42 per tier × 5 tiers = $182.1

Order-Related cost = $86.41 per order × 1 order = $86.41

Total cost = Size related cost + Complexity-Related cost + Order-Related cost + Cost of purchased decorations for cake = $292.1 + $182.1 + $86.41 + $73.45 = $634.06

Overall margin = Charges for the Haupt wedding cake - Total cost = $718.21 - $634.06 = $84.15

Overall margin is $84.15