Question

I ALWAYS THUMBS UP, THANKS!

Gino's Restaurant is a popular restaurant in Boston, Massachusetts. 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 the following major activities: Activity Cost Pool Serving a party of diners Serving a diner Serving drinks Activity Measure Number of parties served Number of diners served Number of drinks ordered 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. Data concerning these activities are shown below. Serving a Party $56,000 7,000 parties Total cost Total activity Serving a Dinner $189,000 30,000 diners Serving Drinks $100,300 59,000 drinks Total $345,300 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 was $345,300 and that 30,000 diners had been served. Therefore, the average cost per diner was $11.51 ($345,300 + 30,000 diners = $11.51 per diner). Required: 1. Compute the activity rates for each of the three activities. (Round your answers to 2 decimal places.) Cost per unit of activity Serving a Party per party Serving a Diner per diner Serving Drinks per drink

Answer 1

Solution: 1) Activity Cost Pool Activity Measure Serving a party of diners Number of parties served Serving a diner Number of diners served Serving a drink Number of drinks ordered Total Cost Total Activity A A 56000 189000 100300 7,000 parties 30,000 diners 59,000 drinks activity rate A/B 8.00 6.30 1.70 2) Total Cost Calculation 38.30 8*1+6.3*4+1.7*3 20.608*1+6.3*2+1.7*0 19.408*1+6.3*1+1.7*3 A party of four diners who order three drinks in total. A party of two diners who do not order any drinks. A party of one diner who orders three drinks. b. 3) A party of four diners who order three drinks in total. A party of two diners who do not order any drinks. A party of one diner who orders three drinks. Total Cost No of diners A 38.30 20.60 19.40 average cost per diner A/B 4. 9.575 2 10.300 19,400