Hiram\'s Lakeside is a popular restaurant located on Lake Washington in Seattle.

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 belovw. Activity Cost Pool Serving a party of diners Serving a diner Serving drinks Total Cost Total Activity $13,250 5,300 parties $ 107,520 12,800 diners $ 27,270 10,100 drinks Activity Measure Number of parties served Number of diners served Number of drinks ordered 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 dinners? (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.) Total Cost Average Cost a. A party of four diners who order four drinks in total b. A party of three diners who do not order any drinks. c. A party of one diner who orders three drinks per diner per diner per diner

Explanation / Answer

STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Serving a prty of diners number of parties 13,250 5,300 $ 2.50 per party Serving a dinner Number of dinners 107,520 12,800 $8.40 per dinner Serving a drink Number of drinks 27,270 10,100 $ 2.70 per drink Case-A: Cost of a party(2.50 per party) 2.5 Cost of 4 dinners @8.40 33.6 Cost of 4 drinks @ 2.70 10.8 Total cost 46.9 Cost per dinner (46.90/4) 11.725 Case-B: Cost of a party(2.50 per party) 2.5 Cost of 3 dinners @8.40 25.2 Cost of No drinks @ 2.70 0 Total cost 27.7 Cost per dinner (27.70/3) 9.23 Case-C: Cost of a party(2.50 per party) 2.5 Cost of 1 dinners @8.40 8.4 Cost of 3 drinks @ 2.70 8.1 Total cost 19 Cost per dinner (19/1) 19

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