Reference no: EM13328732

Gino's Restaurant is a popular restaurant of Boston, Massachusetts. 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 the following major activities:

Activity Cost Pool	Activity Measure
Serving a party of diners	Number of parties served
Serving a diner	Number of diners served
Serving drinks	Number of drinks ordered

A group of diners who ask to sit at the same table is 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.

Data concerning these activities are shown below.

Serving a Party		Serving a Dinner		Serving Drinks		Total
Total cost	$ 34,000		$ 205,000		$ 68,000		$ 307,000
Total activity	6,000	parties	15,000	diners	10,000	drinks

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 was $307,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $20.47 ($307,000 ÷ 15,000 diners = $20.47 per diner).

Compute the activity rates for each of the three activities.

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 order three drinks in total.
b. A party of two diners who do not order any drinks.
c. A lone diner who orders two drinks.

Convert the total costs you computed in Requirement 2 above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties?

a. A party of four diners who order three drinks in total.
b. A party of two diners who do not order any drinks.
c. A lone diner who orders two drinks.