Sven's Cookhouse is a popular restaurant located on Lake Union in Seattle. 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 three major activities. She then completed the first-stage allocations of costs to the activity cost pools, using data from last month's operations. The results appear below: Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 17,400 5,800 parties Serving a diner Number of diners served $ 106,480 12,100 diners Serving a drink Number of drinks ordered $ 34,240 10,700 drinks.
The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries. A group of diners who ask to sit at the same table are 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. Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. He knew that the total cost for the month (including organization-sustaining costs) was $180,000 and that 12,000 diners had been served. Therefore, the average cost per diner was $15. Required:
1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners?Total Cost a. A party of six diners who order four drinks in total. $ b. A party of two diners who do not order any drinks. $ c. A lone diner who orders two drinks. $ 2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties?Average Cost a. A party of six diners who order four drinks in total. $ per diner b. A party of two diners who do not order any drinks. $ per diner c. A lone diner who orders two drinks. $ per diner.