Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle.
ID: 2571636 • Letter: H
Question
Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below.
The above costs include all of the costs of the restaurant except for 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 costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $180,000 and that 12,000 diners had been served. Therefore, the average cost per diner was $15.
Required:
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 dinners? (Round your intermediate calculations to 2 decimal places. Round your Total Cost final answers to 2 decimal places and your Average Cost final answers to 3 decimal places.)
1. A party of Five diners who order four drinks in total. per diner? total cost?
2. A party of five diners who do not order any drinks. Per diner? total costs?
3. A party of one diner who orders three drinks. per diner? total costs?
Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 17,110 5,900 parties Serving a diner Number of diners served $ 93,170 12,100 diners Serving drinks Number of drinks ordered $ 31,930 10,300 drinksExplanation / Answer
Activity rate: Serving a party = total cost of activity / Number of parties served = 17110/5900 = $ 2.90 per party Serving a dinner = Total cost of activity / Number of diners = 93170/12100 = $ 7.70 per diner Serving a drink = Total cost of activity / Number of drinks = 31930/10300 = $3.10 per drink Option 1 Option 2 Option 3 Number of party 1 1 1 Number of Diners 5 5 1 Number of drinks 4 0 3 Activity Cost: Serving a party(@ 2.90 per party) 2.9 2.9 2.9 Serving a diner(@ 7.70 per diner) 38.5 38.5 7.7 Serving a drink (@3.10 per drink) 12.4 0 9.3 Total activity cost 53.8 41.4 19.9 Divide by Number of diner 5 5 1 Cost per diner 10.76 8.28 19.9
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