Question
Hiram?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
Hiram?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 three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below.
The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries.
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.
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 (including organization-sustaining costs) was $180,000 and that 12,000 diners had been served. Therefore, the average cost per diner was $15.
Required:
1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)
a. Party of three diners who order four drinks in total --- Total cost ? b. Party of four diners who do not order any drinks --- total cost ? c. A lone diner who orders two drinks --- total cost ?
2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations and final answers to 2 decimal places.)
a. Party of three diners who order four drinks in total --- per diner ? b. Party of four diners who do not order any drinks --- per diner ? c. A lone diner who orders two drinks --- per diner ?
Activity Cost Pool Serving a party of diners Serving a diner Serving a drink Activity Measure Number of parties served Number of diners served Number of drinks ordered $ $ $ Total Cost 17,340 114,810 37,440 Total Activity 5,100 parties 12,900 diners 10,400 drinks
Step by Step Solution
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