The Goody is a popular restaurant. The owners, have been trying to better understand costs at the restaurant and has hired you to conduct an activity based costing study. You have identified three major activities to which all costs of the restaurant have been assigned. The activity pools are:

Activity Cost PoolActivity MeasureTotal CostTotal Activity

Seating a party of diners Number of parties seated$42,000 8,000 parties

Serving a dinerNumber of diners served$142,00016,000 diners

Serving drinksNumber of drinks ordered$ 26,00010,000 drinks

A group of diners who ask to sit at the same table are counted as a party.

Prior to the ABC study, the owners knew very little about the costs of the restaurant. They know that the total cost for the month was $210,000 and that 16,000 diners had been served. Therefore, the average cost per diner was $13.125.

1.Assuming no other costs are relevant except those listed above, what is the total cost of serving each of the following parties of diners under the ABC system?

a.A party of four diners who order three drinks in total.

b.A party of two diners who do not order any drinks.

c.A single diner who orders two drinks.

2.Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties of dinners?

a.A party of four diners who order three drinks in total.

b.A party of two diners who do not order any drinks.

c.A single diner who orders two drinks.

3.Why do the costs per diner for the three different parties differ from each other and from the overall average cost of $13.125 per diner?