Cathy, the manager of Cathys Catering, Inc., uses activity-based costing to compute the costs of...
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Accounting
Cathy, the manager of Cathys Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 5 people to serve and clean up. Cathy offers two types of partiesan afternoon picnic and an evening formal dinner. The breakdown of the costs follows.
Activities (and cost drivers)
Afternoon Picnic
Formal Dinner
Advertising (parties)
$
97
per party
$
97
per party
Planning (parties)
$
94
per party
$
114
per party
Renting equipment (parties, guests)
$
48
per party plus $15 per guest
$
71
per party plus $24 per guest
Obtaining insurance (parties)
$
220
per party
$
410
per party
Serving (parties, servers)
$
54
per server per party
$
70
per server per party
Preparing food (guests)
$
19
per guest
$
33
per guest
Per party costs do not vary with the number of guests.
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?
Answer & Explanation
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