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 5 people to serve and clean up. Cathy offers two types of parties, an afternoon picnic and an evening formal dinner. The breakdown of the costs follows:
Activities (and cost drivers) Afternoon Picnic Formal Dinner
Advertising (parties) $ 81 per party $ 81 per party
Planning (parties) $ 68 per party $ 108 per party
Renting equipment $ 59 per party plus $ 79 per party plus
(parties, guests) $ 11 per guest $ 24 per guest
Obtaining insurance (parties) $ 180 per party $ 440 per party
Serving (parties, servers) $ 59 per server per party $ 79 per server per party
Preparing food (guests) $ 16 per guest $ 28 per guest
Per party costs do not vary with the number of guests.
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? (Round your answers to 2 decimal places.)
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