Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Question
Chapter 4, Problem 14P
1
To determine
Activity based costing:
ABC is a system in which various activities are identified. At first, costs of activities are calculated and then such cost is allocated to all the products. Relationship among costs, products and activities, established under this system, helps in the allocation of cost process.
An activity rate for each given activity.
2
To determine
Activity cost
Activity cost refers to the total cost that is incurred by each activity. This cost is calculated and then assigned to all the products with the use of a cost allocation base or measure.
To calculate: Total activity cost of given three dinner parties.
3
To determine
Average cost
Average cost, also known as unit cost, is calculated by the division of total cost and number of units.
To calculate: To convert amount calculated in part (2) to cost per dinner.
4
To determine
Cost per dinner:
cost per dinner can be calculated by dividing total cost with total number of dinners.
To explain: why the cost per dinner for three different parties differ.
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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
$ 28,350
$ 113,160
$ 40,170
Total Activity
5,500 parties
12,300 diners
10,300 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…
Chapter 4 Solutions
Introduction To Managerial Accounting
Ch. 4 - What are the three common approaches for assigning...Ch. 4 - Why does activity-based costing appeal to some...Ch. 4 - Why do departmental overheadrates something result...Ch. 4 - What are the four hierarchical levels of activity...Ch. 4 - Why activity-based costing is described as a...Ch. 4 - Why do overhead costs often shift from high-volume...Ch. 4 - What are the three major ways in which...Ch. 4 - What are the major limitations of activity-based...Ch. 4 - Prob. 1AECh. 4 - Prob. 2AE
Ch. 4 - Change the data in red so that the Data area looks...Ch. 4 - Prob. 1F15Ch. 4 - Prob. 2F15Ch. 4 - Prob. 3F15Ch. 4 - Greenvood Company manufactures two products14,000...Ch. 4 - Prob. 5F15Ch. 4 - Prob. 6F15Ch. 4 - Greenvood Company manufactures two products14,000...Ch. 4 - Prob. 8F15Ch. 4 - Greenwood Company manufactures two products14,000...Ch. 4 - Prob. 10F15Ch. 4 - Prob. 11F15Ch. 4 - Greenwood Company manufactures two products14,000...Ch. 4 - Prob. 13F15Ch. 4 - Prob. 14F15Ch. 4 - Greenwood Company manufactures two products14,000...Ch. 4 - ABC Cost Hierarchy L041 The following activities...Ch. 4 - Compute Activity Rates L042 Rustafson Corporation...Ch. 4 - Compute ABC Product Costs L043 Lamer Corporation...Ch. 4 - Contrast ABC and Conventional Product Costs L044...Ch. 4 - Assigning Overhead to Products in ABC L042, L043...Ch. 4 - Cost Hierarchy and Activity Measures L041 Various...Ch. 4 - Contrast ABC and Conventional Product Costs L042,...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Rocky Mountain Corporation makes two types of...Ch. 4 - Contrasting Activity-Based Costing and...Ch. 4 - Contrasting ABC and Conventional Product cost...Ch. 4 - ABC Cost Hierarchy L041 Mitchell Corporation...Ch. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Contrasting ABC and Conventional Product Costs...Ch. 4 - Contrast Activity-Based Costing and Conventional...Ch. 4 - Adria Company recently implemented an...
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