Gino\'s Restaurant is a popular restaurant in Boston, Massachusetts. The owner o
ID: 341647 • Letter: G
Question
Gino's Restaurant is a popular restaurant in Boston, Massachusetts. 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 the following major activities Activity Cost Pool Serving a party of diners Serving a diner Serving drinks Activity Measure Number of parties served Number of diners served Number of drinks ordered 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, depends on the number of diners served or the number of drinks served Data concerning these activities are shown below Total $256,800 Serving a Party Serving Drinks $81,200 Serving a Dinner Total cost Total activity $33,600 $142,000 8,000 parties 20,000 diners 58,000 drinks 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 was $256,800 and that 20,000 diners had been served. Therefore, the average cost per diner was $12.84 ($256,800 ÷ 20,000 diners = $12.84 per diner) Required: 1. Compute the activity rates for each of the three activities. (Round your answers to 2 decimal places.) Cost per unit of activity Serving a Party Serving a Diner Serving Drinks per party per diner per drinkExplanation / Answer
Answer
Activities
Cost (A)
Total activity (B)
Activity rates (A / C)
Serving a party
$ 33,600.00
8000 parties
$ 4.20
per party
Serving a dinner
$ 1,42,000.00
20000 diners
$ 7.10
per diner
Serving Drinks
$ 81,200.00
58000 drinks
$ 1.40
per drink
Total cost
$ 2,56,800.00
a.
No.
Activity rates
Total cost
Party
1
$ 4.20
per party
$ 4.20
Diners
4
$ 7.10
per diner
$ 28.40
Drinks
3
$ 1.40
per drink
$ 4.20
a. Total cost of serving a party of 4 diners who order 3 drinks
$ 36.80
b.
No.
Activity rates
Total cost
Party
1
$ 4.20
per party
$ 4.20
Diners
2
$ 7.10
per diner
$ 14.20
Drinks
0
$ 1.40
per drink
$ -
b. Total cost of serving a party of 2 diners who order no drinks
$ 18.40
c.
No.
Activity rates
Total cost
Party
1
$ 4.20
per party
$ 4.20
Diners
1
$ 7.10
per diner
$ 7.10
Drinks
2
$ 1.40
per drink
$ 2.80
c. Total cost of serving a party of 1 diner who order 2 drinks
$ 14.10
Activities
Cost (A)
Total activity (B)
Activity rates (A / C)
Serving a party
$ 33,600.00
8000 parties
$ 4.20
per party
Serving a dinner
$ 1,42,000.00
20000 diners
$ 7.10
per diner
Serving Drinks
$ 81,200.00
58000 drinks
$ 1.40
per drink
Total cost
$ 2,56,800.00
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