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Three families went out to dinner together for a soccer team celebration. They asked for separate checks, but the weather was unable to do so...

Ch. 17 Activity Based Costing Three families went out to dinner together for a soccer team celebration. They asked for separate checks, but the water was unable to do so. When they received the bill, they weren't sure what was the best way to divide up the costs. Someone suggested that they simply divide the bill by the number of people to get a cost per person. Someone else suggested that they take the total bill and divide by the number of families. Luckily, one of the parents was a CPA and determined that it would be most accurate to use something similar to an Activity Based Costing situation. Required: 1. Allocate the bill based on the number of families. 12 2. Allocate the bill based on the number of people at the table. 3. Allocate the bill based on the different cost drivers. (See additional data.) 14 15 D E G A B 17 Dinner Bill details: Cost 18 19 Pizza 95 20 Beer 42 21 Appetizers 36 22 Dessert 18 23 subtotal 191 24 Sales tax @ 9% subtotal 17.19 25 Tip @ 15% of subtotal 28.65 26 Total $ 236.84 27 28 29 30 31 Number of people 32 Number of people who ate pizza 33 Number of people who drank byer 34 Number of people who ate appetizers 35 Number of people who ate dessert 36 Total Jones family 7 Carter family 4 14 4 4 Smith family 3 3 3 0 2 11 5 7 Om 4 3 2 0 1 Questions C D E F Jones family Carter family Smith family Total A B 2 Allocate the bill based on the number of families: 23 24 25 26 Total bill 236.84 27 28 29 30 Allocate the bill based on the number of people: 31 32 33 34 Total bill 236.84 35 Total number of people 36 37 Cost per person 38 39 Cost assigned: 40 41 Jones family Carter family Smith family Total 22 23 Allocate the bill based on the different cost drivers: 24 25 Jones family Carter family Smith family Total 26 Dinner Bill details: Cost 27 95 28 Pizza 29 # of people who ate pizza 30 Cost per person 31 Pizza Cost assigned 32 42 33 Beer 34 # of people who drank beer 35 Cost per person Assignment Real and Rea 1 Questions 36 Beer Cost assigned 37 38 36 39 Appetizers 40 # of people who ate appetizers 41 Cost per person 42 Appetizer cost assigned 43 18 44 Dessert 45 # of people who ate dessert 46 Cost per person 47 Dessert cost assigned 49 191.00 So subtotal 51 Sales tax @ 9% subtotal 52 Tip @ 15% of subtotal 53 Total 17.19 28.65 236.84 $ 54 7 1. Which allocation would you prefer if you were the Jones? Why? 8 9 10 11 2. Which allocation would you prefer if you were the Carters? Why? 12 13 14 15 3. Which allocation would you prefer if you were the Smiths? Why? 16 17 18 19 4. What was the cost driver for the appetizers? (How did you divide the cost of the appetizers?) 20 2 35. What was the cost driver for the tip? (How did you divide the cost of the tip?) 4 5 26 27 6. What did you learn from this exercise? 28 29 Assignment Req 1 and 2 Req3 Questions Ch. 17 Activity Based Costing Dinner Bill details: Cost 95 Pizza Beer Appetizers Dessert subtotal Sales tax 9% subtotal Tip 15% of subtotal Total 36 18 191 17.19 28.65 236,84 Carter family Total Jones family 7 4 4 Number of people Number of people who ate pizza Number of people who drank beer Number of people who ate appetizers Number of people who ate dessert Smith family 3 3 3 0 4 2 4 14 11 5 7 3 3 0 2 0 Assignment Req 1 and 2 Req3 Questions Ch. 17 Activity Based Costing Dinner Bill details: Cost 95 Pizza Beer Appetizers Dessert subtotal Sales tax 9% subtotal Tip 15% of subtotal Total 36 18 191 17.19 28.65 236.84 Total Number of people Number of peope who ate pizza Number of people who drank beer Number of people who ate appetizers Number of people who ate dessert Jones family 7 4 0 3 1 Carter family 4 4 2 Smith family 3 3 3 0 14 11 S 7 3 4 0 Allocate the bill based on the number of families: Jones family Carter family Smith family Total Total bill 236.84 Allocate the hill based on the number of people Jones family Carter family Smith family Total 236.84 Total bill Total number of people 0 Cost per person Cost assigned Assignment Req 1 and 2 Req3 Questions Ch. 17 Activity Based Costing Dinner Bill details: Cost Pizza Beer Appetizers Dessert subtotal Sales tax 9% subtotal Tipe 15% of subtotal Total 95 42 36 18 191 17.19 28.65 236,841 Total Jones family 7 4 Carter family 4 4 Number of people Number of people who ate pizza Number of people who drank beer Number of people who ate appetizers Number of people who ate dessert Smith family 3 3 3 0 2 0 14 11 5 7 3 3 1 4 0 Allocate the bill based on the different cost drivers: Jones family Carter family Smith family Total Dinner Bill details: Cost 95 Pizza of people who ate pizza Cost per person Pizza Cost assigned Beer of people who drank beer Cost per person Beer Cost assigned 36 Appetizers of people who ate appetizers Cost per person Appetizer cost assigned 18 Dessert of people who ate dessert Cost per person Dessert cost assigned subtotal Sales tax 9% subtotal Tip 15% of subtotal 191.00 17.19 28.65 Req 1 and 2 Req3 Questions Assignment Ch. 17 Activity Based Costing Name 1. Which allocation would you prefer if you were the Jones? Why? 2. Which allocation would you prefer if you were the Carters? Why? 3. Which allocation would you prefer if you were the Smiths? Why? 4. What was the cost driver for the appetizers? (How did you divide the cost of the appetizers?) 5. What was the cost driver for the tip? (How did you divide the cost of the tip?) 6. What did you learn from this exercise

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