Groce Catering Uses Activity-Based Costing for Its Overhead Costs

question 113

Multiple Choice

Groce Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based costing system:

The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used as the activity measure for the Arranging Functions activity cost pool.

Management would like to know whether the company made any money on a recent function at which 150 meals were served. The company catered the function for a fixed price of $14.00 per meal. The cost of the raw ingredients for the meals was $8.75 per meal. This cost is in addition to the costs of wages, supplies, and other expenses detailed above.

For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are classified as a Yellow cost, supplies and raw ingredients as a Green cost, and other expenses as a Red cost.

-(Appendix 5A) In an action analysis report prepared for the function mentioned above,what would be the "yellow margin" in the report,rounded to the nearest whole dollar?

• A) $240.
• B) $315.
• C) $365.
• D) $420.

Compare unit product costs under traditional costing and activity-based costing.

Calculate overhead assigned to products using traditional costing methods.

Calculate activity rates for various cost pools under activity-based costing.

Understand the impact of overhead allocation on product pricing.

---

Definitions:

Bond Liability

A financial obligation representing money a company owes to bondholders, to be repaid at a future date, typically with interest.

Market Rate

The current interest rate available in the marketplace on loans, bonds, or deposits, often influenced by supply and demand and the monetary policy of central banks.