Question
In: Accounting
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 4 people to serve and clean up. Cathy offers two types of parties, an afternoon picnic and an evening formal dinner. The breakdown of the costs follows:
| Activities (and cost drivers) | Afternoon Picnic | Formal Dinner | ||||
| Advertising (parties) | $ | 93 | per party | $ | 93 | per party |
| Planning (parties) | $ | 50 | per party | $ | 130 | per party |
| Renting equipment | $ | 54 | per party plus | $ | 83 | per party plus |
| (parties, guests) | $ | 13 | per guest | $ | 24 | per guest |
| Obtaining insurance (parties) | $ | 165 | per party | $ | 360 | per party |
| Serving (parties, servers) | $ | 47 | per server per party | $ | 83 | per server per party |
| Preparing food (guests) | $ | 21 | per guest | $ | 33 | per guest |
Per party costs do not vary with the number of guests.
Required:
a. Compute the cost of a 20-guest afternoon picnic.
b. Compute the cost of a 20-guest evening formal dinner.
c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs? (Round your answers to 2 decimal places.)
Solutions
Expert Solution
Solution:
a) Determine the cost of a 20 guest afternoon picnic as shown below:
| Details | Amount | Calculation |
| Advertising | $93 | $93*1 party |
| Add: Planning | $50 | $50*1 party |
| Add: Renting equipment | $314 | ($54 *1 party)+(13*20 guests) |
| Add: Obtaining insurance | $165 | $165 *1 party |
| Add: Serving | $188 | $47 * 4 serves |
| Add: Preparing foods | $420 | $21 *20 guests |
| Cost of an afternoon picnic | $1,230 |
b)
Determine the cost of a 20 guest evening formal dinner as shown below:
| Details | Amount | Calculation |
| Advertising | $93 | $93*1 party |
| Add: Planning | $130 | $130*1 party |
| Add: Renting equipment | $563 | ($83 *1 party)+(24*20 guests) |
| Add: Obtaining insurance | $360 | $360 *1 party |
| Add: Serving | $332 | $83 * 4 serves |
| Add: Preparing foods | $660 | $33 *20 guests |
| Cost of an afternoon picnic | $2,138 |
c)
Determine the cost for each guest for each type of party as shown below:
1) Afternoon picnic = Total cost of afternoon picnic party / Number of guests per party
=$1,230 /20
=$61.5
2)Evening formal dinner = Total cost of evening formal dinner/ Number of guests per dinner
=$2,138 /20
=$106.9
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ekkarill92 answered 2 years agoRelated Solutions
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...
Cathy, the manager of Cathy’s Catering, Inc., uses
activity-based costing to compute the costs of her catered parties.
Each party is limited to 20 guests and requires 5 people to serve
and clean up. Cathy offers two types of parties, an afternoon
picnic and an evening formal dinner. The breakdown of the costs
follows:
Activities (and cost drivers)
Afternoon Picnic
Formal Dinner
Advertising (parties)
$
79
per party
$
79
per party
Planning (parties)
$
72
per party
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Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...
Cathy, the manager of Cathy’s Catering, Inc., uses
activity-based costing to compute the costs of her catered parties.
Each party is limited to 20 guests and requires four people to
serve and clean up. Cathy offers two types of parties, an afternoon
picnic and an evening formal dinner. The breakdown of the costs
follows:
Activities (and cost drivers) Afternoon Picnic Formal Dinner
Advertising (parties) $ 100 per party $ 100 per party Planning
(parties) $ 75 per party $ 125...
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...
Cathy, the manager of Cathy’s Catering, Inc., uses
activity-based costing to compute the costs of her catered parties.
Each party is limited to 20 guests and requires 4 people to serve
and clean up. Cathy offers two types of parties, an afternoon
picnic and an evening formal dinner. The breakdown of the costs
follows:
Activities (and cost
drivers)
Afternoon Picnic
Formal Dinner
Advertising (parties)
$
121
per party
$
121
per party
Planning (parties)
$
52
per party
$
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Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...
Cathy, the manager of Cathy’s Catering, Inc., uses
activity-based costing to compute the costs of her catered parties.
Each party is limited to 20 guests and requires 5 people to serve
and clean up. Cathy offers two types of parties, an afternoon
picnic and an evening formal dinner. The breakdown of the costs
follows: Activities (and cost drivers) Afternoon Picnic Formal
Dinner Advertising (parties) $ 105 per party $ 105 per party
Planning (parties) $ 64 per party $ 102...
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her...
Cathy, the manager of Cathy’s Catering, Inc., uses
activity-based costing to compute the costs of her catered parties.
Each party is limited to 20 guests and requires 4 people to serve
and clean up. Cathy offers two types of parties—an afternoon picnic
and an evening formal dinner. The breakdown of the costs
follows.
Activities (and cost drivers)
Afternoon Picnic
Formal Dinner
Advertising (parties)
$
97
per party
$
97
per party
Planning (parties)
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56
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costs
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$
82,000
Supervisory expense
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12,100
Distribution of Resource Consumption Across Activity Cost
Pools:
Activity Cost Pools
Machining
Order Filling
Other
Equipment depreciation
0.60
0.30
0.10
Supervisory expense
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0.20
0.20
In the...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Doede Corporation uses activity-based costing to compute product
margins. In the first stage, the activity-based costing system
allocates two overhead accounts--equipment depreciation and
supervisory expense--to three activity cost pools--Machining, Order
Filling, and Other--based on resource consumption. Data to perform
these allocations appear below:
Overhead costs:
Equipment depreciation
$
30,000
Supervisory expense
$
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Distribution of Resource Consumption Across Activity Cost
Pools:
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Machining
Order Filling
Other
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0.40
0.10
Supervisory expense
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Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
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margins. In the first stage, the activity-based costing system
allocates two overhead accounts--equipment depreciation and
supervisory expense--to three activity cost pools--Machining, Order
Filling, and Other--based on resource consumption. Data to perform
these allocations appear below:
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Equipment depreciation
$
103,000
Supervisory expense
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13,100
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Order Filling
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Supervisory expense
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