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Q1) Sven's Cookhouse is a popular restaurant located on Lake Union 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, recognized three major activities. She then completed the first-stage allocations of costs to the activity cost pools, using data from last month's operations. The results appear below:

Activity Cost Pool Activity Measure Total Cost Total Activity
Serving a party of diners Number of parties served $12,000 5,000 drinks
Serving a diner Number of diners served $90,000 12,000 drinks
Serving a drink Number of drinks ordered $26,000 10,000 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. A group of diners who ask to sit at the same table are 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.

Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. He 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.

problem:

According to the activity-based costing system, what is the total cost of serving each of the following parties of diners?

a. A party of four diners who three drinks in total.

b. A party of four diners who do not order any drinks.

c. A lone diner who orders two drinks

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918345

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