Gino\'s Restaurant is a popular restaurant in Boston, Massachusetts. The owner o

Question

Gino's Restaurant is a popular restaurant in Boston, Massachusetts. 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 the following major activities: Activity Cost Pool Serving a party of diners Serving a diner Serving drinks Activity Measure Number of parties served Number of diners served 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. Serving a Party Serving a Dinner Serving Drinks Total $43,200 Total cost Total activity $148,000 $72,000 $263,200 8,000 parties 20,000 diners 48,000 drinks 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 $263,200 and that 20,000 diners had been served. Therefore the average cost per diner was $13.16 ($263,200 ÷ 20,000 diner: $13.16 per diner). Required 1. Compute the activity rates for each of the three activities. (Round your answers to 2 decimal places.) Serving a Party Serving a Diner Serving Drinks Cost per unit of activi per party per diner per drink

Explanation / Answer

1)Activity rate:
serving a party=43200/8000=5.40
Serving dinner=148000/20000=7.40
Serving drinks=72000/48000=1.50

2)
a)=(5.4*1)+(4*7.4)+(3*1.5)=39.5
b)=(5.4*1)+(2*7.4)+(0)=20.20
c)=(5.4*1)+(1*7.4)+(2*1.5)=15.80

3)here the activity driver is no fo dinners
a)=39.5/4=9.88
b)=20.20/2=10.10
c)15.8/1=15.8

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