Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to com
ID: 2571301 • Letter: C
Question
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 4 people to serve and clean up. Cathy offers two types of parties, an afternoon picnic and an evening formal dinner. The breakdown of the costs follows:
Per party costs do not vary with the number of guests.
Required:
a. Compute the cost of a 20-guest afternoon picnic.
b. Compute the cost of a 20-guest evening formal dinner.
c. How much should Cathy charge for each guest for each type of party if she wants to cover her costs? (Round your answers to 2 decimal places.)
Activities (and cost drivers) Afternoon Picnic Formal Dinner Advertising (parties) $ 97 per party $ 97 per party Planning (parties) $ 80 per party $ 126 per party Renting equipment $ 54 per party plus $ 66 per party plus (parties, guests) $ 14 per guest $ 23 per guest Obtaining insurance (parties) $ 185 per party $ 380 per party Serving (parties, servers) $ 59 per server per party $ 81 per server per party Preparing food (guests) $ 16 per guest $ 29 per guestExplanation / Answer
Answer. Afternoon Picnic Formal Dinner Advertising (Parties) 97 97 Planning (Parties) 80 126 Renting Equipment 334 526 ($54 + $14 x 20) ($66 + $23 x 20) Obtaining Insurance (parties) 185 380 Serving (parties, servers) 236 324 $59 X 4 $81 X 4 Preparing Food (guests) 320 580 $16 X 20 $29 X 20 Total Cost per party 1,252 2,033 Answer a. Afternoon Picnic = $1,252 Answer b. Evening Formal Dinner = $2,033 Answer c. Afternoon Picnic Formal Dinner Cost Per Party 1,252 2,033 No. of Guest per Party 20 20 Charging Amount per Guest 62.60 101.65