Customers (L02, L03, L04)

Jordan's Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified the following major activities:

CHECK FIGURE

(3b) $11.95 per diner i£

Activity Cost Pool Activity Measure Serving a party of diners Number of parties served Serving a diner Number of diners served Serving drinks Number of drinks ordered A group of diners who ask to sit at the same table are counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served. Data concerning these activities are displayed below.

Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant.
She knew that the total cost for the month was $195,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $13 ($195,000 -r- 15,000 diners = $13 per diner).
Required:
1 .
Compute the activity rates for each of the three activities.
2. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners?

a. A party of four diners who order three drinks in total.

b. A party of two diners who do not order any drinks.

c. A lone diner who orders two drinks.
3. Convert the total costs you computed in part ( 1 ) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties?

a. A party of four diners who order three drinks in total.

b. A party of two diners who do not order any drinks.

c. A lone diner who orders two drinks.
4. Why do the costs per diner for the three different parties differ from each other and from the overall average cost of $13 per diner?

Transcribed Image Text:

File Edit View Insert Format Tools Data Window nep ABC 6 f. 22 AU$ %,000 Arial 12 B 4 A B C E F G H 1 Serving a Party 2 Total cost 3 Total activity $33,000 Serving a Diner $138,000 Serving Drinks $24,000 Total $195,000 6,000 parties 15,000 diners 10,000 drinks 4 Sheet1 Sheet2 Sheet3 Ready Draw AutoShapes 4 4 NUM