Problem 3-14A

4. Why do the cost per diner for the three different parties differ from each other and from the overall average cost of $9.80 per diner.

i. The mainte Required: 1. 2. products. Classify each of the above activities as a unit- For each of the above activities, suggest an activity mea activity-based PROBLEM 3-14A Compute and Use Activity Rates to Determine the Costs of Serving Gino's Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an costing study. The intern, in consultation with the owner, identified the following major activities: Customers [LO3-2, LO3-3, LO34] Activity Measure Activity Cost Pool Number of parties served Number of diners served Number of drinks ordered ..... Serving a party of diners Serving a diner. Serving drinks A group of diners who ask to sit at the same table is 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 wash- ing dishes, depend on the number of diners served. Data concerning these activities are shown below: Total Serving a Party Serving a Diner Serving Drinks $313,600 Total cost ..... Total activity.. $32,800 8,000 parties $211,200 32,000 diners $69,600 58,000 drinks 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 was $313,600 and that 32,000 diners had been served. Therefore, the average cost per diner was $9.80 ($313,600 32,000 diners = $9.80 per diner)