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Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...

Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 4 people to serve and clean up. Cathy offers two types of parties—an afternoon picnic and an evening formal dinner. The breakdown of the costs follows.

Activities (and cost drivers) Afternoon Picnic Formal Dinner
Advertising (parties) $ 101 per party $ 101 per party
Planning (parties) $ 80 per party $ 104 per party
Renting equipment (parties, guests) $ 45 per party plus $13 per guest $ 76 per party plus $22 per guest
Obtaining insurance (parties) $ 230 per party $ 420 per party
Serving (parties, servers) $ 49 per server per party $ 84 per server per party
Preparing food (guests) $ 21 per guest $ 25 per guest

Per party costs do not vary with the number of guests.

Required:

a. Compute the cost of a 20-guest afternoon picnic.

Compute the cost of a 20-guest afternoon picnic.
Afternoon picnic

b. Compute the cost of a 20-guest evening formal dinner.

Compute the cost of a 20-guest evening formal dinner.
Evening formal dinner

c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs?

How much should Cathy charge for each guest for each type of party if she wants to cover her costs? (Round your answers to 2 decimal places.)
Charging Amount
Afternoon picnic    per guest
Formal dinner per guest
business   accounting   
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Answer #1
Ans. A Activities Afternoon Picnic
Advertising $101
Planning $80
Renting equipment $305
Obtaining insurance $230
Serving $196
Preparing food $420
Total Cost $1,332
Calculations :
Renting equipment $45 + ($13 * 20)
Serving $49 * 4
Preparing food $21 * 20
Ans. B Activities Formal Dinner
Advertising $101
Planning $104
Renting equipment $516
Obtaining insurance $420
Serving $336
Preparing food $500
Total Cost $1,977
Calculations :
Renting equipment $76 + ($22 * 20)
Serving $84 * 4
Preparing food $25 * 20
Ans. C Charging amount = Total cost / Number of guests
Afternoon Picnic $1,332 / 20 $66.60 per guest
Formal Dinner $1,977 / 20 $98.85 per guest
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