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4 Stan's Cookhouse is a popular restaurant located in the center of Birmingham. The owner of the restaurant has been trying to better understand costs
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Stan's Cookhouse is a popular restaurant located in the center of Birmingham. 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. He then completed the first-stage allocations of costs to the activity cost pools, using data from last months operations. The results appear below: |
Activity Cost Pool | Activity Measure | Total Cost | Total Activity | ||
Serving a party of diners | Number of parties served | 10,000 | 12,000 | parties | |
Serving a diner | Number of diners served | 83,000 | 14,000 | diners | |
Serving a drink | Number of drinks ordered | 33,000 | 11,000 | drinks | |
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. He knew that the total cost for the month (including organization-sustaining costs) was 177,000 and that 18,000 diners had been served. Therefore, the average cost per diner was 9.83. | ||
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 to 2 decimal places. Round your answers to 2 decimal places.) | |
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 to 2 decimal places. Round your answers to 2 decimal places.) |
3. | Which of the following are the reasons for that the average cost per diner under ABC differs from the overall average cost of 9.83 per diner? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) |
check all that apply The 9.83 per diner figure does not recognize that there are some economies of scale in serving larger parties.unanswered The 9.83 per diner figure does not recognize that some diners order more drinks than others.unanswered The average cost of 9.83 per diner includes organization-sustaining costs that are excluded from the computations in the activity-based costing system. The activity-based costing system recognizes all of the differences in diners demands on resources.unanswered |
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