Question
Cathy, the manager of Cathys 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 Cathys 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) | Afternoon Picnic | Formal Dinner | ||||
| Advertising (parties) | $ | 93 | per party | $ | 93 | per party |
| Planning (parties) | $ | 50 | per party | $ | 146 | per party |
| Renting equipment (parties, guests) | $ | 60 | per party plus $12 per guest | $ | 80 | per party plus $24 per guest |
| Obtaining insurance (parties) | $ | 200 | per party | $ | 350 | per party |
| Serving (parties, servers) | $ | 44 | per server per party | $ | 80 | per server per party |
| Preparing food (guests) | $ | 18 | per guest | $ | 33 | 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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Statistics Informed Decisions Using Data
Authors: Michael Sullivan III
5th Edition
978-0134135373, 134133536, 134135377, 978-0134133539
