1C2H THE CHOCOLATE BAKER SPECIALIZES IN CHOCOLATE BAKED GOODS. THE F...

205. CSO: 1C2c LOS: 1C2h

The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed

the profitability of a product line by comparing revenues to the cost of goods sold.

However, Barry White, the firm’s new accountant, wants to use an activity-based costing

system that takes into consideration the cost of the delivery person. Listed below are

activity and cost information relating to two of Chocolate Baker’s major products.

Muffins Cheesecake

Revenue $53,000 $46,000

Cost of goods sold 26,000 21,000

Delivery Activity

Number of deliveries 150 85

Average length of delivery 10 Minutes 15 Minutes

Cost per hour for delivery $20.00 $20.00

Using activity-based costing, which one of the following statements is correct?

a. The muffins are $2,000 more profitable.

b. The cheesecakes are $75 more profitable.

c. The muffins are $1,925 more profitable.

d. The muffins have a higher profitability as a percentage of sales and, therefore, are

more advantageous.