Cathy, the manager of Cathy\'s Catering, Inc., uses activity-based costing to co

Question

Cathy, the manager of Cathy's Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 5 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:

Per party costs do not vary with the number of guests.

Compute the cost of a 20-guest afternoon picnic.

Compute the cost of a 20-guest evening formal dinner.

How much should Cathy charge for each guest for each type of party if she wants to cover her costs?(Round your answers to 2 decimal places.)

  Activities (and cost drivers) Afternoon Picnic Formal Dinner   Advertising (parties) $ 95 per party $ 95 per party   Planning (parties) $ 98 per party $ 104 per party   Renting equipment $ 42 per party plus $ 66 per party plus        (parties, guests) $ 13 per guest $ 21 per guest   Obtaining insurance (parties) $ 235 per party $ 430 per party   Serving (parties, servers) $ 58 per server per party $ 84 per server per party   Preparing food (guests) $ 16 per guest $ 32 per guest

Explanation / Answer

a) Cost of 20 guests afternoon Picnic = 95 + 98 + 42 + (13 X 20)

b) Cost of 20 Guests evening formal dinner = 95 + 104 + 66 + (21 X 20) + 430 + (84 X 5) + (32 X 20)

= $ 2,175

c) Charging Amount :

Afternoon Picnic = 1,340/20 = $67 per guests

Formal Dinner = 2,175/20 = $108.75 per guests

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