- Hiram S Lakeside Is A Popular Restaurant Located On Lake Washington In Seattle The Owner Of The Restaurant Has Been Try 1 (150.73 KiB) Viewed 13 times
- Hiram S Lakeside Is A Popular Restaurant Located On Lake Washington In Seattle The Owner Of The Restaurant Has Been Try 2 (191.97 KiB) Viewed 13 times
- Hiram S Lakeside Is A Popular Restaurant Located On Lake Washington In Seattle The Owner Of The Restaurant Has Been Try 3 (14.72 KiB) Viewed 13 times
- Hiram S Lakeside Is A Popular Restaurant Located On Lake Washington In Seattle The Owner Of The Restaurant Has Been Try 4 (36.3 KiB) Viewed 13 times
Hiram's Lakeside is a popular restaurant located on Lake Washington 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 and then completed the first-stage allocations of costs to the activity cost pools. The results appear below. 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 Total Cost $ 14,500 $ 97,020 $ 32,860 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. 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, depend on the number of diners served or the number of drinks served. Total Activity 5,000 parties 12,600 diners 10,600 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 (including organization-sustaining costs) was $180,000 and that 12,000 diners had been served. Therefore, the average cost per diner was $15. a. A party of five diners who order four drinks in total. b. A party of four diners who do not order any drinks. c. A party of one diner who orders three drinks. Required: 1&2. According to the activity-based costing system, what is the total cost and average cost per diner for serving each of the following parties of diners? (Round your intermediate calculations to 2 decimal places. Round your Total Cost final answers to 2 decimal places and your Average Cost final answers to 3 decimal places.) Total Cost Average Cost per diner per diner per diner
Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: "My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.50 to determine the bid price. Since our average cost is only $2.435 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart." To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow: Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs. Other (organization-sustaining costs and idle capacity costs) Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Distribution of Resource Consumption Across Activities Req 1 Removing Asbestos 60% 60% Req 2 $ 406,000 793,000 96,000 58,000 280,000 502,000 $ 2,135,000 Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs 40% 70% 10% 30% Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost None Required: 1. Perform the first-stage allocation of costs to the activity cost pools. Req 3A to 3C $ Estimating Working on and Job Nonroutine Jobs 20% 40% 20% 10% 25% 50% Complete this question by entering your answers in the tabs below. Removing asbestos Setup 10% 0% 5% 20% 35% 0% 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. Perform the first-stage allocation of costs to the activity cost pools. Estimating and Job Setup 0 $ Other 10% 0% 35% 0% 30% 20% 0 $ Working on Nonroutine Jobs Total Activity 1,000 thousand square feet 500 jobs 100 nonroutine jobs 0 $ Total 100% 100% 100% 100% 100% 100% Other $ 0 $ Total 0 0 0 0 0 0 0
Compute the activity rates for the activity cost pools. Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Activity Rate per thousand square feet per job per nonroutine job
Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. (Round the "Average Cost per thousand square feet" to 2 decimal places.) a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. Total cost of the job Average Cost per thousand square feet Routine 1,000 square feet job Routine 2,000 square feet job Nonroutine 2,000 square feet job Show less A