Answered step by step
Verified Expert Solution
Question
1 Approved Answer
EXERCISE 7-15 Calculating and Interpreting Activity-Based Costing Data [L03, LO4] Hiram's Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of
EXERCISE 7-15 Calculating and Interpreting Activity-Based Costing Data [L03, LO4] Hiram's Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below. A Total CostTotal Activity ivity Gost Pool Serving a party of diners Serving drinks Activity Measure Number of parties served Number of diners served Number of drinks ordered $33,000 $138,000 $24,000 6,000 parties 15,000 diners 10,000 drinks The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries. A group of diners who ask to sit at the same table are counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $240,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $16 Required I. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? A party of four diners who order three drinks in total of two diners who do not order any drinks A lone diner who orders two drinks Convert the total costs you computed in (1) above to costs per diner. In other words, what is c. 2. e cost per diner for serving each of the following parties? a. A party of four diners who order three drinks in total b. A p arty of two diners who do not order any drinks A lone diner who orders two drinks Why do the costs per diner for the three different parties differ from each other and from the overall average cost of $16 per diner? C
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started