Analyze the total monthly fixed cost
Question
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
Sales volume (units) |
||
4,000 |
5,000 |
|
Cost of sales |
$338,000 |
$422,500 |
Selling and administrative costs |
$89,600 |
$106,000 |
The best estimate of the total monthly fixed cost is
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:
Activity Cost Pools |
Activity Rate |
Size-related | $0.94 per guest |
Complexity-related | $31.62 per tier |
Order-related | $55.70 per order |
Data concerning two recent orders are listed here:
|
Pyburn Wedding |
Smith Wedding |
Number of reception guests | 72 | 189 |
Number of tiers on the cake | 4 | 5 |
Cost of purchased decorations for cake | $29.92 | $68.75 |
Suppose the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?