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Cathy, the manager of Cathy's Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests
Cathy, the manager of Cathy's Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 4 people to serve and clean up. Cathy offers two types of partiesan afternoon picnic and an evening formal dinner. The breakdown of the costs follows. Activities (and cost drivers) Advertising (parties) Planning (parties) Renting equipment (parties, guests) Obtaining insurance (parties) Serving (parties, servers) Preparing food (guests) Afternoon Picnic $ 81 per party $ 76 per party $ 59 per party plus $13 per guest $ 215 per party $ 50 per server per party $ 22 per guest Formal Dinner $ 81 per party $112 per party $ 79 per party plus $21 per guest $425 per party $ 83 per server per party $ 35 per guest Per party costs do not vary with the number of guests. Required: a. Compute the cost of a 20-guest afternoon picnic. b. Compute the cost of a 20-guest evening formal dinner. c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs
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