Business, 14.07.2020 22:01, izzyisawesome5232

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. Activity Cost Pool Activity Measure Total Cost Total Activity
Serving a party of diners Number of parties served $33,000 6,000 parties
Serving a diner Number of diners served $138,000 15,000 diners
Serving drinks Number of drinks ordered $24,000 10,000 drin

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

Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served. Other costs, such as washing plates and glasses, depends on the number of diners served or the number of drinks 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 $180,000 and that 12,000 diners had been served. Therefore, the average cost per dinner was $15.

Required:

1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners?

a. A party of three diners who order three drinks in total.
b. A party of three diners who do not order any drinks.
c. A party of one diner who orders 4 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?

a. A part of three diners who order 3 drinks in total.
b. A party of three diners who do not order any drinks.
c. A party of one diner who orders 4 drinks.

Answers: 1

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Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the res...