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 ($250 each). The cost information to make one cake is shown in the image.What is the cost for the first cake? What cost would not be included in the second cake? What is the cost of the second cake? What would be the total cost of this order if the offer was accepted? How much profit will Sara be recording for this special order? If your company policy is to always have a 15% profit on all order, would you still accept this order? If you would not accept the order, what price would you negotiate? One CakeDirect materials$ 50Direct labor100Variable overhead25Fixed overhead10

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Answered: Sara makes wedding cakes from her home.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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?

One Cake
Direct materials
$ 50
Direct labor
100
Variable overhead
25
Fixed overhead
10

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