PROBLEM 5-7 Activity-Based Costing Computing and Using Activity Rates to Determine the Costs of Serving Customers [LO1 - CC1; LO2 - CC3, 6, 7, 8] Jordan's Lakeside is a popular restaurant located on Lake Muskoka in Ontario. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an ABC study. The intern, in consultation with the owner, identified the following major activities: (3 k Activity Cost Pool Activity Measure Serving a party of diners Serving a diner Number of parties served Serving drinks Number of diners served Number of drinks ordered One or more diners who ask to sit at a 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. Data concerning these activities are displayed below. A B C D E F G H Serving a Party Serving a Diner Serving Drinks Total 2 Total cost $68,250 $143,500 $42,000 $253,750 3 Total activity 6,825 parties 17,500 diners 14,000 drinks 4 5 Prior to the ABC study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month was $253,750 and that 17,500 diners had been served. Therefore, the average cost per diner was approximately $14.50 (= $253,750 : 17,500 diners). Required: 1. Compute the activity rate for each of the three activities. 2. According to the ABC system, what is the total cost of serving each of the following parties of diners? a. A party of four diners who do not order any drinks. b. A party of two diners who order four drinks in total. c. A lone diner who orders two drinks. 3. Convert the total costs you computed in Requirement (2) to costs per diner. In other words, what is the average cost per diner for serving each of the following parties of diners? a. A party of four diners who do not order any drinks. b. A party of two diners who order four drinks in total. c. A lone diner who orders two drinks. 4. Why do the costs per diner for the three different parties differ from each other and from the overall average cost of $14.50 per diner