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) | $ | 105 | per party | $ | 105 | per party |
Planning (parties) | $ | 92 | per party | $ | 108 | per party |
Renting equipment | $ | 45 | per party plus | $ | 82 | per party plus |
(parties, guests) | $ | 13 | per guest | $ | 25 | per guest |
Obtaining insurance (parties) | $ | 155 | per party | $ | 415 | per party |
Serving (parties, servers) | $ | 43 | per server per party | $ | 84 | per server per party |
Preparing food (guests) | $ | 21 | per guest | $ | 26 | 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? (Round your answers to 2 decimal places.)
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