Question

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 Serving a party of diners Number of parties served Serving a diner Number of diners served Serving drinks Number of drinks ordered Total Cost Total Activity $ 17,360 5,600 parties $ 113,460 12,200 diners $ 33,330 10,100 drinks 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, depend 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 diner was $15. Required: 1&2. According to the activity-based costing system, what is the total cost and average cost per diner for serving each of the following parties of diners? (Round your intermediate calculations to 2 decimal places. Round your Total Cost final answers to 2 decimal places and your Average Cost final answers to 3 decimal places.)

Answer 1

1&2)	party of six diners who order four drinks in total					12.02	(72.1/6)
	a party two diner who do not order any drink					10.85	(21.7/2)
	party of one diner who order four drinks					25.6	(25.6/1)

working

		Cost per unit of activity
Serving a party		3.1	per party
Serving a diner		9.3	per diner
serving drinks		3.3	per drink
(total cost/total activity)
party of six diners who order four drinks in total					72.1	(3.1+6*9.3+4*3.3)
a party two diner who do not order any drink					21.7	(3.1+2*9.3+0)
party of one diner who order four drinks					25.6	(3.1+9.3+3.3*4)