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.

Activity Cost Pool	Activity Measure	Total Cost		Total Activity
Serving a party of diners	Number of parties served	$	13,500	5,400	parties
Serving a diner	Number of diners served	$	103,320	12,600	diners
Serving drinks	Number of drinks ordered	$	28,350	10,500	drinks

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:

1&2. 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.)

A. a party of 3 diners who order 5 drinks total (whats the total cost) & (average cost per diner)

B. a party of 5 diners who do not order any drinks (whats the total cost) & (average cost per diner)

C. A party of 1 diner who orders two drinks (whats the total cost) & (average cost per diner)

Dont forget to round.

Answer 1

1		Activity	Total cost	Activity	Cost per activity
	Serving a part of dinners	No. Of parties	13500	5400	2.5
	Serving a dinner	No. Of Dinners	103320	12600	8.2
	Serving drinks	No. Of drinks	28350	10500	2.7
2		Party	dinner	Drinks	Total
a)	A party of 3 dinners 5 drinks	1	3	5
	Cost per activiy	2.5	8.2	2.7
	Total cost	2.5	24.6	13.5	40.6
b)	A party of 5 dinners 0 drinks	1	5	0
	Cost per activiy	2.5	8.2	2.7
	Total cost	2.5	41	0	43.5
c)	A party of 1 dinner 2 drinks	1	1	2
	Cost per activiy	2.5	8.2	2.7
	Total cost	2.5	8.2	5.4	16.1
			Number of dinners
3		Total cost		Cost per dinner
a)	A party of 4 dinners 3 drinks	40.6	3	13.53
b)	A party of 2 dinners 0 drinks	43.5	5	8.7
c)	A party of 1 dinner 2 drinks	16.1	1	16.1