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) | $ 97 per party | $ 97 per party |
| Planning (parties) | $ 52 per party | $ 134 per party |
| Renting equipment (parties, guests) | $ 48 per party plus $15 per guest | $ 82 per party plus $24 per guest |
| Obtaining insurance (parties) | $ 170 per party | $ 420 per party |
| Serving (parties, servers) | $ 57 per server per party | $ 84 per server per party |
| Preparing food (guests) | $ 21 per guest | $ 30 per guest |
Per party costs do not vary with the number of guests.
Required:
a. Compute the cost of a 20-guest afternoon picnic.
| Afternoon Picnic |
b. Compute the cost of a 20-guest evening formal dinner.
| Evening Formal Dinner |
c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs?
| Charging Amount | ||
| Afternoon Picnic | per guest | |
| Formal Dinner | per guest |
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Internal Auditing Assurance And Advisory Services
Authors: Kurt R. Reding, Paul J. Sobel, Urton L. Anderson, Michael J. Head, Sridhar Ramamoorti, Mark Salamasick, Cris Riddle
5th Edition
1634541367, 978-1634541367
