Cathy, the manager of Cathy's Catering, Ic., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires four people to serve and clean up. Cathy offers two types of parties-an afternoon picnic and an evening formal dinner. The breakdown of the costs follows. Activities (and cost drivers) Advertising (parties) Planning (parties) Renting equipment (parties, guests) Obtaining insurance (parties) Serving (parties, servers) Preparing food (guests) Afternoon Picnic Formal Dinner $100 per party $ 75 per party $ 50 per party plus $10 per guest $200 per party $ 50 per server per party $ 20 per guest $100 per party $125 per party $ 75 per party plus $20 per guest $400 per party $ 75 per server per party $ 30 per guest Per party costs do not vary with the number of guests. Required: a. Compute the cost of a 20-guest afternoon picnic. b. Compute the cost of a 20-guest evening formal dinner. c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs?
Cathy, the manager of Cathy's Catering, Ic., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires four people to serve and clean up. Cathy offers two types of parties-an afternoon picnic and an evening formal dinner. The breakdown of the costs follows. Activities (and cost drivers) Advertising (parties) Planning (parties) Renting equipment (parties, guests) Obtaining insurance (parties) Serving (parties, servers) Preparing food (guests) Afternoon Picnic Formal Dinner $100 per party $ 75 per party $ 50 per party plus $10 per guest $200 per party $ 50 per server per party $ 20 per guest $100 per party $125 per party $ 75 per party plus $20 per guest $400 per party $ 75 per server per party $ 30 per guest Per party costs do not vary with the number of guests. Required: a. Compute the cost of a 20-guest afternoon picnic. b. Compute the cost of a 20-guest evening formal dinner. c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Cathy's Catering Cost Analysis**
Cathy, the manager of Cathy’s Catering, Inc., employs activity-based costing to calculate expenses for her catered events. Each event is limited to 20 guests and necessitates four servers for assistance. Cathy provides two types of events: an afternoon picnic and an evening formal dinner. Below is a detailed breakdown of the costs:
| Activities (and cost drivers) | Afternoon Picnic | Formal Dinner |
|---------------------------------------|----------------------------------------------------|--------------------------------------------------|
| Advertising (parties) | $100 per party | $100 per party |
| Planning (parties) | $75 per party | $125 per party |
| Renting equipment (parties, guests) | $50 per party **plus** $10 per guest | $75 per party **plus** $20 per guest |
| Obtaining insurance (parties) | $200 per party | $400 per party |
| Serving (parties, servers) | $50 per server per party | $75 per server per party |
| Preparing food (guests) | $20 per guest | $30 per guest |
**Note**: The costs per party remain constant irrespective of the number of guests.
**Required Calculations:**
a. Determine the total cost for a 20-guest afternoon picnic.
b. Determine the total cost for a 20-guest evening formal dinner.
c. Calculate the charge per guest for each event type to ensure costs are covered.
*To respond to these requirements, input your calculations in the sections provided below.*
**Input Section:**
- **Required A**: Enter the computed cost for a 20-guest afternoon picnic.
- **Required B**: Enter the computed cost for a 20-guest evening formal dinner.
- **Required C**: Enter how much to charge per guest to cover costs for each type of event.
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