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: 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:
-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 Pyburn wedding cake to just break even?

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:  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: 
-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 Pyburn wedding cake to just break even?

Quizplus · Accepted Answer

To break even, the company must charge an amount equal to the total avoidable costs. Since the question states that all listed costs are avoidable, the correct choice is the one that matches the total of these costs, which is $279.87.

Lifsey Wedding Fantasy Company Makes Very Elaborate Wedding Cakes to Order