Leeds Catering Uses Activity-Based Costing for Its Overhead Costs The Number of Meals Served Is the Measure of Activity

question 16

Multiple Choice

Leeds 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: $\begin{array}{l}\begin{array}{lcc}&\text { Activity}&\text { Cost Pools }\\&\text { Preparing}&\text {Arranging }\\&\text { Meals}&\text { Functions }\\\text { Wages}& £ 0.80 & £ 180.00 \\\text { Supplies}& £ 0.40 & £ 290.00 \\\text { Other expenses. } & £ 0.20 & £ 140.00 \\\end{array}\\\end{array}$
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 90 meals were served. The company catered the function for a fixed price of £25.00 per meal. The cost of the raw ingredients for the meals was £13.90 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. Suppose an action analysis report is prepared for the function mentioned above.
-According to the activity-based costing system, what was the total cost (including the costs of raw ingredients) of the function mentioned above? (Round to the nearest whole pound.)

• A)£1,487
• B)£1,337
• C)£2,187
• D)£1,987

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Definitions:

Unearned Rent

Income received for rent before the rental period has occurred, recorded as a liability until the period passes.

Adjusted Trial Balance

A listing of all the accounts and their balances after adjustments have been made, used to prepare financial statements.

Retained Earnings

The portion of net income that is kept by a company to reinvest in its core business or to pay debt, rather than being distributed to shareholders as dividends.

Revenue Accounts

Accounts that track the income generated from the sale of goods and services, investments, and other sources during the accounting period.