Assignment 5 Activity Based Costing answer2

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Algoma University *

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2313

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Economics

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Nov 24, 2024

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docx

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Uploaded by DoctorPencilEmu27

Question 2 (20 Marks) One of the biggest issues in the restaurant industry is not accurately knowing the cost for key activities in the business Using the information found on page 219 of the textbook for Problem 5-7, you will practice this. Please respond to the questions below. Your answers to the questions, including the calculations should be presented on this sheet. Clearly indicate which part of the requirement your calculations pertains. If the specific part of the question is not identified the calculations will not be considered for marks. Show all calculations for full marks Requirement: Part A (6 marks) Compute the activity rate for each of the following three activities. i) serving a party; 8.3 ii) serving a dinner 5.1 iii) serving drinks 1.2 Part B (6 marks) According to the Activity Based Costing (ABC) system, what is the total cost of serving each of the following parties of diners i) a party of four diners who do not order drinks; 32.3 ii) a party of two diners who order four drinks in total; and 18.5 iii) a loner diner who orders two drinks. 15.8

Part C (6 marks) Convert the total costs you computed in requirement B to costs per diner. In other words, what is the average cost per diner for serving each of the following parties of diners? i) a party of four diners who do not order drinks; 8.08 ii) a party of two diners who order four drinks in total; and 9.25 iii) a loner diner who orders two drinks. 15.8 Part D 2 marks Why do the costs per diner for the above three different parties differ from each other and from the overall average cost of $14.50 per diner?

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