Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order

ECONOMICS

Multiple Choice

Use the following information to answer this question.

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?

A. $152.45

B. $165.41

C. $96.66

D. $460.30

Click here for the SOLUTION