Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 10, Problem 1TP
Seda Sarkisian makes wedding cakes from her home. A customer has requested two duplicate wedding cakes: one for the wedding and one to be frozen for their anniversary. The couple has offered $400 for both cakes instead of $500 ($250 each). The cost information to make one cake is shown.
A. What is the cost for the first cake?
B. What cost would not be included in the second cake?
C. What is the cost of the second cake?
D. What would be the total cost of this order if the offer was accepted?
E. How much profit will Seda be recording for this special order?
F. If your company policy is to always have a 15% profit on all order, would you still accept this order?
G. If you would not accept the order, what price would you negotiate?
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Sara makes wedding cakes from her home. A customer has requested two duplicate wedding cakes: one for the wedding and one to be frozen for their anniversary. The couple has offered $400 for both cakes instead of $500 ($250 each). The cost information to make one cake is shown in the image.
What is the cost for the first cake?
What cost would not be included in the second cake?
What is the cost of the second cake?
What would be the total cost of this order if the offer was accepted?
How much profit will Sara be recording for this special order?
If your company policy is to always have a 15% profit on all order, would you still accept this order?
If you would not accept the order, what price would you negotiate?
Julianna Abdallah owns and operates FirstCakes, a bakery that creates personalized birthday cakes for a child’s first birthday. The cakes, which sell for $56 and feature an edible picture of the child, are shipped throughout the country. A typical month’s results are as follows:
Sales revenue
$749,280
Variable expenses
561,960
Contribution margin
187,320
Fixed expenses
133,000
Operating income
$ 54,320
How many cakes will Julianna Abdallah have to sell if she wants to earn $171,654 in operating income each month?
cakes
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Assuming a 30% tax rate, how many cakes will Julianna Abdallah have to sell if she wants to earn $74,284 in net income each month? (Round answer to 0 decimal places, e.g. 5,275.)
cakes
Tracy is unsure how much to charge for the cupcakes. When she was making the cupcakes by herself and only rented a small storefront that was only open on weekends, she calculated the cost per cupcake based on the cost of ingredients and she added 50% to that cost to cover all of her other expenses. She is not sure if that was accurate.
Tracy has asked you to help her determine the cost per cupcake. She has given you her estimated total for each expense. She does not know how to allocate her overhead costs. She also knows that some of her costs are product costs and some are period costs. She has given you a list of costs and needs you to, first, determine which costs are period costs and which costs are product costs and, secondly, determine which are direct materials, direct labor, and factory overhead. She believes that the best cost driver for the factory overhead costs to be the number of cupcakes baked and sold.
Your assignment is to calculate the cost per cupcake and…
Chapter 10 Solutions
Principles of Accounting Volume 2
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