6-61
Bevard 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 $28.92 per tier. (Cakes with more tiers are
more complex.) Finally, the activity rate for the Order-Related activity cost pool is $78.19 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:
68. 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 Euertz wedding cake to
just break even?
69. Assuming that the company charges $534.11 for the Sparacio wedding cake, what would
be the overall margin on the order?
6-64
Roshannon Corporation uses activity-based costing to compute product margins. In the
first stage, the activity-based costing system allocates two overhead accounts-equipment
expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based
on resource consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and
Supervising costs are assigned to products using the number of batches. The costs in the Other
activity cost pool are not assigned to products. Activity data for the company’s two products
follow:
Finally, sales and direct cost data are combined with Processing and Supervising costs to
determine product margins.
70. How much overhead cost is allocated to the Processing activity cost pool under activity–
based costing in the first stage of allocation?
71. The activity rate for the Processing activity cost pool under activity–based costing is
closest to:
72. What is the overhead cost assigned to Product P3 under activity-based costing?
73. What is the product margin for Product P3 under activity-based costing?
6-69
Encarnacion Corporation has an activity-based costing system with three activity cost
pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead
accounts, equipment expense and indirect labor, are allocated to the three activity cost pools
based on resource consumption. Data used in the first stage allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are
assigned to products using the number of batches. The costs in the Other activity cost pool are
not assigned to products. Activity data for the company’s two products follow:
Finally, the costs of Processing and Supervising are combined with the following sales and direct
cost data to determine product margins.
74. How much overhead cost is allocated to the Supervising activity cost pool under activity–
based costing?
75. The activity rate for the Supervising activity cost pool under activity-based costing is
closest to:
76. What is the overhead cost assigned to Product C6 under activity-based costing?
77. What is the product margin for Product C6 under activity-based costing?
6-74
Traughber Corporation uses an activity based costing system to assign overhead costs to
products. In the first stage, two overhead costs-equipment expense and indirect labor-are
allocated to the three activity cost pools-Processing, Supervising, and Other-based on resource
consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and
Supervising costs are assigned to products using the number of batches. The costs in the Other
activity cost pool are not assigned to products. Activity data for the company’s two products
follow:
78. How much overhead cost is allocated to the Processing activity cost pool under activity–
based costing in the first stage of allocation?
79. The activity rate for the Processing activity cost pool under activity–based costing is
closest to:
80. What is the overhead cost assigned to Product B4 under activity-based costing?
6-78
Ollivier Corporation has an activity-based costing system with three activity cost pools-
Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead
accounts, equipment expense and indirect labor, are allocated to the three activity cost pools
based on resource consumption. Data used in the first stage allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are
assigned to products using the number of batches. The costs in the Other activity cost pool are
not assigned to products. Activity data for the company’s two products follow:
81. How much overhead cost is allocated to the Supervising activity cost pool under activity-
based costing?
82. The activity rate for the Supervising activity cost pool under activity-based costing is
closest to: