Activity-based costing. Carlton Fisher, the manager of Kingfish Charters, uses a

Question

Activity-based costing. Carlton Fisher, the manager of Kingfish Charters, uses activity-based costing to compute the costs of his deep-sea fishing charters. Each chartered boat holds six paying customers and a guide. The company offers two types of charters to corporations planning events—half-day trips for beginners and full-day trips for more seasoned fishermen. The breakdown of the costs is as follows: Activities (with cost drivers) Half-Day Charter Costs Full-Day Charter Costs Advertising $215 per event $216 per event Permits $34.25 per boat $50 per boat Equipment Use $20 per boat + $5 per person (including guides) $40 per boat + $8 per person (including guides) Insurance $75 per boat $127 per boat Paying Guides $300 per boat per guide $405 per boat per guide Food and drinks $40 per person (including guides) $60 per person (including guides) Required: a. Compute the cost of a corporate event requiring four boats for half-day charters for 28-persons (including four guides). b. Compute the cost of a corporate event requiring four boats for full-day charters for 28-persons (including four guides). c. Recommend a minimum price per customer to the manager if he wants to cover his costs.

Explanation / Answer

(b) Full day charters (4 boats, 28 people,4 guides

)

Activities (a) Half Day Charter( 4 boats 28 people 4 guides

(b) Full day charters (4 boats, 28 people,4 guides

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Advertising $215 $216 Permits $34.25 x 4 boats = $137 $50 x 4 boats = $200 Equipment $20 x 4 boats + $5 x 28 people =$220 $40 x 4 boats + $8 x 28 people =$384 Insurance $75 x 4 boats = $300 $127 x 4 boats = $508 Paying Guides $300 x 4 guides = $1200 $405 x 4 guides = $1620 Food and drink $40 x 28 people = $1,120 $60 x 28 people = $1680 Total $3192 $4608 (c) minimum price per customer 3192/24 paying customer = $133 $4608/24 paying customer = $192

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