Question

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?
A. The cost of cakes for receptions with more than the average number of guests would go down.
B. The costs of all cakes would go down.
C. The costs of all cakes would go up.
D. The cost of cakes for receptions with fewer than the average number of guests would go down.

Answer 1

Answer:

D, The cost of cakes for receptions with fewer than the average number of guests will go down

Explanation:

Since the costing of receptions will be according to the average number of guest that attend, it can be said there fore that in the making of cakes for the reception, costs will go down or reduce for a reception that has a fewer than average guest. Invariably, if the guests surpass the average number, cake costs will shoot up.

Cheers.