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) | $ | 97 | per party | $ | 97 | per party |
| Planning (parties) | $ | 56 | per party | $ | 140 | per party |
| Renting equipment (parties, guests) | $ | 42 | per party plus $13 per guest | $ | 71 | per party plus $22 per guest |
| Obtaining insurance (parties) | $ | 220 | per party | $ | 395 | per party |
| Serving (parties, servers) | $ | 41 | per server per party | $ | 67 | per server per party |
| Preparing food (guests) | $ | 24 | per guest | $ | 27 | 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?
Solutions
Expert Solution
Solution a:
| Computation of cost of 20 guest afternoon picnic | |
| Particulars | Amount |
| Advertising (parties) | $97.00 |
| Planning (parties) | $56.00 |
| Renting equipment (parties, guests) | $302.00 |
| Obtaining insurance (parties) | $220.00 |
| Serving (parties, servers) | $164.00 |
| Preparing food (guests) | $480.00 |
| Total costs | $1,319.00 |
Solution b:
| Computation of cost of 20 guest evening formal dinner | |
| Particulars | Amount |
| Advertising (parties) | $97.00 |
| Planning (parties) | $140.00 |
| Renting equipment (parties, guests) | $511.00 |
| Obtaining insurance (parties) | $395.00 |
| Serving (parties, servers) | $268.00 |
| Preparing food (guests) | $540.00 |
| Total costs | $1,951.00 |
Solution c:
Amount to be charged for each guest for afternoon picnic = $1,319/20 = $65.95 per guest.
Amount to be charged for each guest for evening formal dinner = $1,951/20 = $97.55 per guest.
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
$
104...
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
$
112...
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)
$
93
per party
$
93
per party
Planning (parties)
$
50
per party
$
130...
Part 3: Activity-Based Costing Banquet Services uses activity-based costing to compute the costs of their catered...
Part 3: Activity-Based Costing
Banquet Services uses activity-based costing to compute the costs
of
their catered parties. Each party is limited to 40 guests and
requires five
people to serve and clean up. Two types of parties, an afternoon
picnic
and an evening formal dinner, are offered. The breakdown of the
costs
follows:
Activities (and cost drivers) Afternoon Picnic Formal Dinner
Advertising (parties) $175 per party $100 per party
Planning (parties) $50 per party $75 per party
Renting equipment $75...
Bubba's Custom Shrimp Catering uses activity-based costing to determine the cost of its catering events. The...
Bubba's Custom Shrimp Catering uses activity-based costing to
determine the cost of its catering events. The firm has two
activity cost pools: cooking (activity rate is $500 per catering
event) and serving (activity rate is $12 per plate). The firm
currently has 25 catering events a year, with an average of 50
plates per event. It also incurs about $400 in direct costs for
each event. The firm has four opportunities to improve its
processes (listed below in the answer...
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
$
82,000
Supervisory expense
$
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
0.60
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
$
14,800
Distribution of Resource Consumption Across Activity Cost
Pools:
Activity Cost Pools
Machining
Order Filling
Other
Equipment depreciation
0.50
0.40
0.10
Supervisory expense
0.50
0.30
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
$
103,000
Supervisory expense
$
13,100
Distribution of Resource Consumption Across Activity Cost
Pools:
Activity Cost Pools
Machining
Order Filling
Other
Equipment depreciation
0.60
0.20
0.20
Supervisory expense
0.60
0.10
0.30
In the...
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