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    Calculating and Interpreting Activity-Based Costing Data

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    CALCULATING AND INTERPRETING ACTIVITY-BASED COSTING DATA
    Hiram's Lakeside is a popular restaurant located on Lake Washington in Seattle, The owner of r restaurant has been trying to better understand costs at the restaurant and has hired a student inter to conduct an activity-based costing study. The intern, in consultation with the owner, identify three major activities and then completed the first-stage allocations of costs to the activity cc! 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 drinks

    The above costs include all of the costs of the restaurant except for organization-sustaining cc>:-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 activity-based costing study, the owner knew very little about the costs of the restae-rant. She knew that the total cost for the month (including organization-sustaining costs) was $240,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $16.
    Required:
    1 According to the activity-based costing system, what is the total cost of serving each of the fol­lowing parties of diners?
    (You can use the simplified approach described at the end of the chapter.
    a. A party of four diners who order three drinks in total.
    b. A party of two diners who do not order any drinks.
    c. Atone diner who orders two drinks.
    2 Convert the total costs you computed m (I) above to costs per diner. In other words, what
    the average cost per diner for serving each of the following parties of diners'?
    a. A party of four diners who order three drinks in total. 6. A party of two diners who do not order any drinks, c. A lone diner who orders two drinks.
    3. Why do the costs per diner for the three different parties differ from each other and from *s overall average cost of S16 per diner?

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    https://brainmass.com/business/product-costing/calculating-interpreting-activity-based-costing-data-155288

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    The expert calculates and interprets activity-based costing data.

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