Amount to be charged to arrive at break even.
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:
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Activity Cost Pools
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Activity Rate
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Size- related
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$0.94 per guest
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Complexity- related
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$ 31.62 per tier
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Order-related
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$ 55.79 per order
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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 a flour, miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders below:
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Pyburn wedding
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Smith wedding
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Number of reception guests
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72
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189
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Number of tiers on the cake
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4
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5
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Cost of purchased decorations for cake
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$29.92
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$62.75
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Assuming that all of the costs listed below are avoidable costs in the event that an order in turned down. What amount would the company have to charge for the pyburn wedding cake to just break even?
a) $279.87
b) $55.79
c) $29.92
d) $338.64