Question

ng Data LO2, LO3] Jane's Cookhouse is a popular restaurant located in a scenic setting. 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 three major activities. The intern then completed the first-stage allocations of costs to the activity cost pools, using data from last month's operations. The results appear below: Total Activity Cost Pool Activity Measure Number of parties served Cost $ 24,780 $136,710 $ 51,920 Total Activity 5,900 parties 14,700 diners 11,300 drinks Serving a party of diners Serving a diner Serving a drink Number of diners served Number of drinks ordered 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. A group of diners who ask to sit at the same 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. 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 (including organization-sustaining costs) was $294,000 and that 14.700 diners had been served. Therefore, the average cost per diner was $20. Required: 1. 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 that orders three drinks in total. (Round your answers to 2 decimal places.) ABC Cost Activity Cost Pool Serving parties Serving diners

Answer 1

Answer:

Activity Cost per party = $24,780 / 5,900
Activity Cost per party = $4.20

Activity Cost per Diner = $136,710 / 14,700
Activity Cost per Diner = $9.30

Activity Cost per Drink = $51,920 / 11,800
Activity Cost per Drink = $4.40

Answer to Requirement 1-a.

Activity Cost Pool Serving parties ($4.20 * 1) Serving Diners ($9.30 * 4) Serving Drinks ($4.40 * 3) ABC Cost 4.20 37.20 13.20 54.60 Total Answer to Requirement 1-b. Activity Cost Pool Serving parties ($4.20 * 1) Serving Diners ($9.30 * 2) Serving Drinks ($4.40 * 0) Total ABC Cost 4.20 18.60 22.80 ABC Cost Answer to Requirement 1-c. Activity Cost Pool Serving parties ($4.20 * 0) Serving Diners ($9.30 * 1) Serving Drinks ($4.40 * 2) Total 9.30 8.80 18.10

Answer to Requirement 2. 13.65 per diner 11.40 per diner 18.10 per diner Calculation: a. Cost per Diner = $54.60 / 4 = $13.65 b. Cost per Diner = $22.80 / 2 = $11.40 c. Cost per Diner = $18.10 / 1 = $18.10