Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The restaurant's owner wants to better understand his costs and hired a student intern to conduct an activity-based costing study. The intern identified three activities, completed the first-stage cost allocations and gathered the activity measure data shown below. Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 12,760 5,800 parties Serving a diner Number of diners served $ 105,270 12,100 diners Serving drinks Number of drinks ordered $ 24,960 10,400 drinks The above costs exclude 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 restaurant costs. She only knew the total cost for the month (including organization-sustaining costs) was $180,000 and 12,000 diners had been served. Therefore, the average cost per diner was $15. Required: 1 and 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 diners? a. A party of four diners who order four drinks in total. per diner b. A party of two diners who do not order any drinks. per diner c. A party of one diner who orders four drinks
Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The restaurant's owner wants to better understand his costs and hired a student intern to conduct an activity-based costing study. The intern identified three activities, completed the first-stage cost allocations and gathered the activity measure data shown below.
| Activity Cost Pool | Activity Measure | Total Cost | Total Activity | |
|---|---|---|---|---|
| Serving a party of diners | Number of parties served | $ 12,760 | 5,800 | parties |
| Serving a diner | Number of diners served | $ 105,270 | 12,100 | diners |
| Serving drinks | Number of drinks ordered | $ 24,960 | 10,400 | drinks |
The above costs exclude 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 restaurant costs. She only knew the total cost for the month (including organization-sustaining costs) was $180,000 and 12,000 diners had been served. Therefore, the average cost per diner was $15.
Required:
1 and 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 diners?
a. A party of four diners who order four drinks in total. per diner
b. A party of two diners who do not order any drinks. per diner
c. A party of one diner who orders four drinks
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