Compute the cost of a 25-guest informal party. Compute the cost of a 25-guest formal meal. How much should Richard's Events charge for each diner for each type of event if the company is to cover its costs?
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Richard's Events provides catering services, among other services. The company has adopted activity-based costing (ABC) for the catering services. The ABC system classifies activities into two groups based on the cost driver used: Diners and Events. Each event is limited to 25 guests and requires four people to serve and clean up. Richard's Events offers two types of catered events—an informal, outside party and a formal, seated meal.
The cost accountant at Richard's Events has developed the following cost-driver rates for the individual activities:
| Activities (and cost drivers) | Informal Party | Formal Dinner | ||||
|---|---|---|---|---|---|---|
| Advertising (events) | $ 144 | per event | $ 144 | per event | ||
| Planning (events) | 114 | per event | 174 | per event | ||
| Renting equipment (events, diners) | 84 | per event | plus 24 per diner | 114 | per event | plus 36 per diner |
| Obtaining insurance (events) | 264 | per event | 504 | per event | ||
| Serving (events) | 264 | per event | 384 | per event | ||
| Preparing food (diners) | 36 | per diner | 48 | per diner |
Per-event costs do not vary with the number of diners.
Required:
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Compute the cost of a 25-guest informal party.
-
Compute the cost of a 25-guest formal meal.
-
How much should Richard's Events charge for each diner for each type of event if the company is to cover its costs?
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