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 $1.15 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $28.75 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $80.45 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:

	Euertz Wedding	Sparacio Wedding
Number of reception guests	71	185
Number of tiers on the cake	10	9
Cost of purchased decorations for cake	$23.10	$81.93

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?

$524.29

$80.45

$23.10

$472.70

Answer 1

Answer:

d. $ 472.70

Explanation:

Particulars	Cost
Size related costs	$          81.65
Complexity related costs	$        287.50
Order related costs	$          80.45
Cost of decoration	$          23.10
Total	$        472.70

In case of any doubt, please comment.