Reference no: EM1311216
Determine the average cost from the given data.
Svens 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, identified three major activities. She then completed the first-stage allocations of costs to the activity cost pools, using data from last months operations. The results appear below:
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Activity Cost Pool
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Activity Measure
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Total Cost
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Total Activity
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Serving a party of diners
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Number of parties served
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$12,000
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5,000 drinks
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Serving a diner
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Number of diners served
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$90,000
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12,000 drinks
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Serving a drink
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Number of drinks ordered
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$26,000
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10,000 drinks
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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.
Required:
Convert the total costs you computed to costs per diner.
Average cost per diner for serving each of the following parties?
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.
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