Larry\'s Lakeside Restaurant is an upscale, popular eatery located on the waterf

Question

Larry's Lakeside Restaurant is an upscale, popular eatery located on the waterfront. Larry is implementing an ABC system for the upcoming year and has identified the following cost pools and activity measures to better understand his overhead costs.
Activity Cost Pool Activity Measure Total Expected Cost Total Expected Activity
Serving a party of diners # of parties served $40,000 5,000 parties
Serving a diner # of diners served $180,000 15,000 diners
Serving a drink # of drinks served $8,000 8,000 drinks

What would Larry's overhead cost of serving a party of 4 diners who order 6 drinks total?


$62

$54

$21

$13

Explanation / Answer

Serving a party of diners # of parties served $40,000 5,000 parties Cost per Party = $40000/5000 = $8 Serving a diner # of diners served $180,000 15,000 diners Cost per Diner = $180,000/15000 = $12 Serving a drink # of drinks served $8,000 8,000 drinks Cost pe rdrink = $8000/8000 = $1 So Larry's overhead cost of serving a party of 4 diners who order 6 drinks = $8 + 4*$12 + 6*$1 = 8+48+6 = $62

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