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 $ 1.29 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. 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 Wedding Twersky Wedding Number of reception guests 52 127 Number of tiers on the cake 2 4 Cost of purchased decorations for cake $ 29.10 $ 54.80 Assuming that the company charges $507.07 for the Twersky wedding cake, what would be the overall margin on the order? Multiple Choice $174.92 $100.04 $407.03 $154.84.

Answer 1

As per the information given in the question, following are the activites cost pools and activity rates:
Activity Cost Pools	Activity Rate
Size-related	$ 1.29 per guest
Complexity-related	$ 28.38 per tier
Order-related	$ 74.88 per order
Further, it is also provided in the question that costs of purchased decorations are accounted for separately for each order
Now, calculation of total cost and overall margin on twersky wedding order:
Particulars	Twersky Wedding	Rate per unit	Cost (IN $ )
No of guests	127	1.29	163.83
No. of tiers	4	28.38	113.52
order related cost	1	74.88	74.88
Cost of purchased decorations			54.8
Total cost (A)	407.03
Amount charged on twersky wedding order (B)	507.07
Overall margin on the order (B-A)	100.04