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:

Answer 1

Answer:

1- Computation of the activity rate for the activities cost:

    Activity Cost Pool           Activity Measure       Total Cost    Total Activity

Serving a Party of Diners   No. of Party's Served       $33,000    6000 parties

Serving a diner                Number of diners served   $138,000   15000 diners

Serving drinks                 Number of drinks ordered  $24,000   10,000 drinks

For first: $\frac{33000}{6000} =$ $5.5 per setup

For second: $\frac{138000}{15000} =$ $9.2 per hour

For third:  $\frac{24000}{10000} =$ $2.4 drinks

• Above will be the cost break up for the party of four diners who order two drinks. A party of two diners who do not order any drinks. A lone diner who orders two drinks.

2- The cost per diner for three different parties differ from each other and the overall average cost $16 per diner  because this average cost does not include organization sustaining cost.

Answer 2

Activity Cost Pool

It is the activity measure total cost of total activity assisting a gathering of guests. The number of people attended $ 14,500 for 5,800 people. Serving a customer number of guests served $ 95,160 for 12,200 diners. Serving a drink number of beverages ordered for $ 27,270  for 10,100 bottles.

1. The above prices cover all of the expenses of the restaurant without for organization-sustaining expenses. Example rent, business taxes, and top-management payrolls. Some expenses, like the expense of cleaning the linens that cover the restaurant's furniture, change with the amount of individuals worked.
2. Additional costs, example washing dishes and glasses, depends on the number of customers attended or the number of drinks served. Prior to the activity-based costing research, the landlord understood very little about the expenses of the restaurant. She knew that the entire cost for the month including organization-sustaining costs was $180,000 and that 12,000 customers must be served.

Accordingly, the average cost per customer was $15.