Gino\'s Restaurant is a popular Boston, M trying to better understand costs at t
ID: 340527 • Letter: G
Question
Gino's Restaurant is a popular Boston, M trying to better understand costs at the rest based costing study. The intem, in consultation with the owner, identified the following major activies: ar restaurant in Boston, Massachusetts. The owner of the restaurant has been Serving a party of diners Serving a diner Number of parties g drinks Number of drinks ordered 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, depends on the number of diners served or the number of drinks served. Data concerning these activities are shown below. $38,000 $69,000 $68,000 40,000 drinks Total activity 5,000 parties 10,000 diners $175,000 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 was $175,000 and that 10,000 diners had been served. Therefore, the average cost per diner was S 17.50 ($ 1 75,000 + 10,000 diners = S 17.50 per diner). Required: 1 Compute the activity rates for each of the three activities. (Round your answers to 2 decimal places.) Cost per unit of activity per diner per drinkExplanation / Answer
Answer:
1
Compute the activity rates for each of the three activities
Computation of the cost per unit
Activity
Cost
Total
Activity
Rate
A
B
C=A/B
Serving a Party
38000
5000
7.6
Serving a Dinner
69000
10000
6.9
Serving a Drink
68000
40000
1.7
Activity
Rate
Serving a Party
7.6
Serving a Dinner
6.9
Serving a Drink
1.7
____________________________________________
2
Answer:
A
party of four diners who order three drinks in total.
40.3
b.
A party of two diners who do not order any drinks.
21.4
c.
one diner who orders two drinks.
17.9
Working notes for the above answer is as under
Activity
Rate
Total Activity
ABC Cost
A
B
C=A*B
Serving a Party
7.6
1
7.6
Serving a Dinner
6.9
4
27.6
Serving a Drink
1.7
3
5.1
Total
40.3
Activity
Rate
Total Activity
ABC Cost
A
B
C=A*B
Serving a Party
7.6
1
7.6
Serving a Dinner
6.9
2
13.8
Serving a Drink
1.7
0
0
Total
21.4
Activity
Rate
Total Activity
ABC Cost
A
B
C=A*B
Serving a Party
7.6
1
7.6
Serving a Dinner
6.9
1
6.9
Serving a Drink
1.7
2
3.4
Total
17.9
__________________________________________
3
ABC Cost
Number
of dinner
Average
cost
A
B
c=a/b
A
party of four diners who order three drinks in total.
40.3
4
10.075
b.
A party of two diners who do not order any drinks.
21.4
2
10.7
c.
one diner who orders two drinks.
17.9
1
17.9
Activity
Cost
Total
Activity
Rate
A
B
C=A/B
Serving a Party
38000
5000
7.6
Serving a Dinner
69000
10000
6.9
Serving a Drink
68000
40000
1.7
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