Chapter 6, Problem 6.14E

To determine

Concept introduction:

Activity-based costing (ABC):

Activity-based costing refers to the method of costing where the overhead cost is assigned to various products. This costing method identifies the relationship between the manufacturing overhead costs and the activities. After establishing the relationship, the indirect cost is allocated to the products.

Requirement 1:

Calculate the cost of serving each of the given parties of diners.

To determine

Concept introduction:

Cost allocation:

Cost allocation refers to the process where the common cost of the production and service rendered to the various departments of the business are distributed. It is used to calculate the actual cost attributed to a specific department.

Requirement 2:

Calculate the average cost per diner for serving each of the following parties.

To determine

Concept introduction:

Cost allocation:

Cost allocation refers to the process where the common cost of the production and service rendered to the various departments of the business are distributed. It is used to calculate the actual cost attributed to a specific department.

Requirement 3:

Provide the reason behind the difference in the cost per diner for the three different parties.