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 Total Cost Total Activity Serving a party of diners Number of parties served $ 17,490 5,300 parties Serving a diner Number of diners served $ 105,780 12,900 diners Serving drinks Number of drinks ordered $ 35,700 10,200 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

Calculation the cost per activity
Activity cost pool	Activity measure	Total cost	Total activity	Cost per Activity
Serving a part of diners	Number of parties served	17,490	5,300	3.3
Serving a diner	Number of diners served	105,780	12,900	8.2
Serving drinks	Number of drinks ordered	35,700	10,200	3.5
		158,970
		Per party (Rate per Party * Number of Party)	Per diner(Rate per Dinner * Number of Dinner)	Per drink (Rate per Drink * Number of Drink)	Total Cost	Number of diner	Average Cost (Total Cost/ Number of Dinner)
		3.3	8.2	3.5
a	A party of four diners who order four drinks in total	3.3	32.8	14	50.1	4	12.525	per diner
b	A party of two diners who do not order any drinks	3.3	16.4	0	19.7	2	9.850	per diner
c	A party of one diner who orders three drinks	3.3	8.2	10.5	22	1	22.000	per diner