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

Using activity-based costing, which 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.

Transcribed Image Text:

Muffins Cheesecake $53,000 $46,000 Revenue Cost of goods sold Delivery activity: Number of deliveries Average length of delivery Cost per hour for delivery 26,000 21,000 85 15 minutes 150 10 minutes $20 $20