Problem 3-14A Compute and Use Activity Rates to
Determine the Costs of Serving Customers [LO3-2,
LO3-3, LO3-4]
Gino’s Restaurant is a popular restaurant in 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 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 as washing plates and glasses, depends on the number of diners
served or the number of drinks served.
Data concerning these activities are shown below.
Serving a Party
Total
cost
Total
activity $32,800
8,000 parties Serving a Dinner Serving Drinks
$211,20
$69,600
0
32,000 diners Total
$313,60
0 58,000 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
$313,600 and that 32,000 diners had been served. Therefore, the average
cost per diner was $9.80 ($313,600 ÷ 32,000 diners = $9.80 per diner).
Required:
1. Compute the activity rates for each
of the three activities. (Round your answers to 2 decimal places.) 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.
b.
c. 3. a.
b.
c. A party of four diners who order
three drinks in total.
A party of two diners who do not
order any drinks.
A party of one diner who orders two
drinks. 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 party of four diners who order
three drinks in total.
A party of two diners who do not
order any drinks.
A party of one diner who orders two
drinks.

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