FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
Serving a party of diners
Serving a diner
Serving drinks
Activity Measure
Number of parties served
Number of diners served.
Number of drinks ordered
Total Cost
$ 19,250
$109,470
$38,110
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.
a. A party of four diners who order four drinks in total
b. A party of three diners who do not order any drinks
c. A party of one diner who orders three drinks
Total Activity
5,500 parties
12,300 dinera
10,300 drinks
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 diners? (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.)
Total Cost
Average Cost
per diner
per diner
per diner
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Transcribed Image Text: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 Serving a party of diners Serving a diner Serving drinks Activity Measure Number of parties served Number of diners served. Number of drinks ordered Total Cost $ 19,250 $109,470 $38,110 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. a. A party of four diners who order four drinks in total b. A party of three diners who do not order any drinks c. A party of one diner who orders three drinks Total Activity 5,500 parties 12,300 dinera 10,300 drinks 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 diners? (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.) Total Cost Average Cost per diner per diner per diner
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