Problem 6 to a restaurant as a group. At the end of the meal, the issue and your
ID: 2544166 • Letter: P
Question
Problem 6 to a restaurant as a group. At the end of the meal, the issue and your friegroup should be shared. One alternative is to figure out the arises of how the bill for theta cost of what each co to split the bill equally among the individuals. vidual consumed and divided up the bill accordingly. Another is Required: O Which system for dividing the billis more equitable? (5 marks) Which system is easier to use? (5 marks) (2) (8) How does this issue relate to the material covered in Activity-B marks)Explanation / Answer
1. Option 1 is more equitable. To divide as per consumption will make it an appropriate allocation as for instance if one of them has a heavy diet or expensive items and other would have had a meek diet or lesser expensive items then latter would have borne the former's cost. In such a scenario equal distribution of bill between two is not justified.
This is in commensuration to the principle of allocating overheads/overhead items as per an activities consumption by a product or service.
2. Option 2 of spitting the bill equally is the easier one. As like absorption costing where an overhead rate is decided and all overheads are allocated on the basis of that without any regard to the level of activity consumption by the different products/services.
3. Similarly, Material covered in Activity Based Costing is an overhead as is Indirect Material. Thus its allocation is made as per its consumption and not divided equally between different products/services.