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 $0.96 per guest.(The greater the number of guests, the larger the cake. )The activity rate for the Complexity-Related cost pool is $54.24 per tier.(Cakes with more tiers are more complex. )Finally, the activity rate for the Order-Related activity cost pool is $56.44 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: Assuming that the company charges $584.18 for the Strobl wedding cake, what would be the overall margin on the order?

Question

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 $0.96 per guest.(The greater the number of guests, the larger the cake. )The activity rate for the Complexity-Related cost pool is $54.24 per tier.(Cakes with more tiers are more complex. )Finally, the activity rate for the Order-Related activity cost pool is $56.44 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:  Assuming that the company charges $584.18 for the Strobl wedding cake, what would be the overall margin on the order?

Quizplus · Accepted Answer

To calculate the overall margin on the Strobl wedding cake, we need to first calculate the total cost of the cake. We can do this using the activity rates and the information provided in the table.

For the Size-Related activity cost pool: 
Strobl cake size = 280 guests 
Activity cost = $0.96 x 280 = $268.80

For the Complexity-Related activity cost pool: 
Strobl cake tiers = 6 
Activity cost = $54.24 x 6 = $325.44

For the Order-Related activity cost pool: 
Strobl cake order = 1 
Activity cost = $56.44 x 1 = $56.44

Total cost of the cake = $268.80 + $325.44 + $56.44 = $650.68

To calculate the overall margin, we subtract the cost of the cake from the price charged: 
Overall margin = $584.18 - $650.68 = -$66.50

This means that Thoen Nuptial Bakery actually lost money on the Strobl wedding cake order.

Therefore, the best choice is B, as it is the only option provided.

Thoen Nuptial Bakery Makes Very Elaborate Wedding Cakes to Order