Question

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Thoen 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 $0.99 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $58.55 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $60.75 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:

	NieWedding		StroblWedding
Number of reception guests		70		135
Number of tiers on the cake		3		5
Cost of purchased decorations for cake	$	39.60	$	35.29

Assuming that the company charges $640.10 for the Strobl wedding cake, what would be the overall margin on the order? (Round your final answer to 2 decimal places)

$522.44

$117.66

$152.95

$178.41

Answer 1

Solution:

Statement for calculating Overall margin on the order :

Details	Amount($)	Amount($)
Sales		$640.10
Less:
Size related cost (135* $0.99)	$133.65
Order related cost (1* $60.75)	$60.75
Complexity related cost (5* $58.55)	$292.75
Purchased decorations cost	$35.29	$522.44
Overall margin on the order		$117.66

Therefore, The correct answer is Option (b). $117.66.

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