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
Serving a party of diners
Serving a diner
Serving drinks Activity Measure
Number of parties served
Number of diners served
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. Total cost
Total activity Serving a Party
$32,800
8,000 parties Serving a Dinner
$211,200
32,000 diners Serving Drinks
$69,600
58,000 drinks Total
$313,600 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 $313,600 and that 32,000 diners had been served. Therefore, the average cost
per diner was $9.80 ($313,600 ÷ 32,000 diners = $9.80per diner). Required:
1. Compute the activity rates for each of the three activities. (Round your answers to 2 decimal places.) Serving a Party
Serving a Diner
Serving Drinks Cost per unit of activity
$
per party
4.10
$
6.60 per diner 1.20 per drink $ 2. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
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. Party of four diners who order three drinks
Party of two diners who order no drinks
A lone diner who orders two drinks Total
$
$
$ 3. Convert the total costs you computed in part (1) above to costs per diner. In other words, what is the average
cost per diner for serving each of the following parties? (Do not round intermediate calculations. Round
your final answers to 2 decimal places.)
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.
Average cost
Party of four diners who order three drinks
Party of two diners who order no drinks
Party of one diner who orders two drinks $
$
$ per diner
per diner
per diner
