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 A group of diners who ask to sit at the same table is counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served. Data concerning these activities are shown below: Serving a Party $38,400 6,000 parties Serving a Diner $67,000 10,000 diners Total cost Total activity Serving Drinks $57,600 48,000 drinks Total $ 163,000 VI 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 $163,000 and that 10,000 diners had been served. Therefore, the average cost per diner was $16.30 ($163,000 = 10,000 diners = $16.30 per diner).

Answer 1

1)			Cost per unit of activity
	Serving a party		6.4	per party
	Serving a diner		6.7	per diner
	serving drinks		1.2	per drink
	(total cost/total activity)
2)
	party of four diners who order three drinks in total					36.8	(6.4+4*6.7+3*1.2)
	a party two diner who do not order any drink					19.8	(6.4+2*6.7+0)
	party of one diner who order two drinks					15.5	(6.4+6.7+1.2*2)
3)	party of four diners who order three drinks in total					9.20	(36.8/4)
	a party two diner who do not order any drink					9.9	(19.8/2)
	party of one diner who order two drinks					15.5	(15.5/1)