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Lifsey
Wedding Fantasy Company 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
|
$0.94 per guest
|
|
Complexity-related
|
$31.62 per
tier
|
|
Order-related
|
$55.70 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 don’t include the costs of purchased
decorations, such as miniature statues and wedding bells, which are
accounted for separately.
Data
concerning two recent orders are listed here:
|
Pyburn Wedding
|
Smith Wedding
|
|
Number of
reception guests
|
72
|
189
|
|
Number of
tiers on the cake
|
4
|
5
|
|
Cost of
purchased decorations for cake
|
$29.92
|
$68.75
|
Assuming that
the company charges $556.96 for the Smith wedding cake, what would be the
overall margin on the order?
