Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 6BTN
Visit and observe the processes of three different fast-food restaurants- these visits can be done as individuals or as teams. The objective of activity-based costing is to accurately assign costs to products and to improve operational efficiency.
Required
- Individuals (or teams) can be assigned to each of three different fast-food establishments. Make a list of the activities required to process an order of a sandwich, beverage, and one side order at each restaurant. Record the time required for each process, from placing the order to receiving the completed order.
- What activities do the three establishments have in common? What activities are different across the establishments?
- Is the number of activities related to the time required to process an order? Is the number of activities related to the price charged to customers? Explain both.
- Make recommendations for improving the processes you observe. Would your recommendations increase or decrease the cost of operations?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Comfort Foods Inc. uses activity-based costing to determine product costs. For each activity listed
in the left column, match an appropriate activity base from the right column. You may use items in
the activity-base list more than once or not at all.
Activity
Activity Base
Cafeteria
Engineering change orders
Customer return processing
Electric power
Kilowatt hours used
Number of customers
Human resources
Number of customer orders
Number of customer returns
Inventory control
Invoice and collecting
Machine depreciation
Materials handling
Order shipping
Payroll
Performance reports
Number of employees
Number of inspections
Number of inventory transactions
Number of machine hours
Number of material moves
Number of payroll checks processed
Number of performance reports
Number of production orders
Number of purchase orders
Production control
Production setup
Purchasing
Quality control
Sales order processing
Number of sales orders
Number of setups
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
Activity Measure
Total Cost
Total Activity
Serving a party of diners
Number of parties served
$19,800
6,000
parties
Serving a diner
Number of diners served
$96,250
12,500
diners
Serving drinks
Number of drinks ordered
$36750
10,500
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.
Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties…
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
Total Activity
5,600 parties
12,100 diners
10,900 drinks
Total Cost
$ 15,120
$ 107, 690
$ 31,610
Number of drinks ordered
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,…
Chapter 4 Solutions
Managerial Accounting
Ch. 4 - Prob. 1MCQCh. 4 - Prob. 2MCQCh. 4 - All of the following are examples of batch-level...Ch. 4 - Prob. 4MCQCh. 4 - Prob. 5MCQCh. 4 - Why are overhead costs allocated to products and...Ch. 4 - What are three common methods of assigning...Ch. 4 - Why are direct labor hours and machine hours...Ch. 4 - What are the advantages of using a single plant...Ch. 4 - The usefulness of a single plant wide overhead...
Ch. 4 - What is a cost object?Ch. 4 - Explain why a single plantwide overhead rate can...Ch. 4 - Why are multiple departmental overhead rates more...Ch. 4 - Prob. 9DQCh. 4 - Prob. 10DQCh. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - Prob. 13DQCh. 4 - Prob. 14DQCh. 4 - 15. What are the four activity levels associated...Ch. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 18DQCh. 4 - Prob. 1QSCh. 4 - Prob. 2QSCh. 4 - Prob. 3QSCh. 4 - Prob. 4QSCh. 4 - Prob. 5QSCh. 4 - Prob. 6QSCh. 4 - Prob. 7QSCh. 4 - Prob. 8QSCh. 4 - Plant wide rate method P1 A manufacturer uses...Ch. 4 - Prob. 10QSCh. 4 - Prob. 11QSCh. 4 - Prob. 12QSCh. 4 - Prob. 13QSCh. 4 - Prob. 14QSCh. 4 - Prob. 15QSCh. 4 - Prob. 16QSCh. 4 - Exercise 17-17 Identifying activity levels C3...Ch. 4 - Prob. 2ECh. 4 - Exercise 17-1 Computing Plantwide overhead rates...Ch. 4 - Prob. 4ECh. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Exercise 17-5 Departmental overhead rates P2 Refer...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Prob. 15ECh. 4 - Prob. 16ECh. 4 - Exerciser 17-14 Activity-based costing P3 A2...Ch. 4 - Prob. 18ECh. 4 - Problem 17-1A Comparing costs using ABC with the...Ch. 4 - Prob. 2PSACh. 4 - Prob. 3PSACh. 4 - Prob. 4PSACh. 4 - Prob. 5PSACh. 4 - Prob. 1PSBCh. 4 - Prob. 2PSBCh. 4 - Prob. 3PSBCh. 4 - Prob. 4PSBCh. 4 - Prob. 5PSBCh. 4 - Prob. 4SPCh. 4 - Prob. 1AACh. 4 - Prob. 2AACh. 4 - Prob. 3AACh. 4 - Prob. 1BTNCh. 4 - Prob. 2BTNCh. 4 - Accounting professionals who for private companies...Ch. 4 - Prob. 4BTNCh. 4 - Prob. 5BTNCh. 4 - Visit and observe the processes of three different...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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 i Number of drinks ordered Total Cost $ 33,000 $ 138,000 $ 24,000 Total Activity 6,000 parties 15,000 diners 10,000 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. 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,…arrow_forwardHiram'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 $ 12,240 $ 118,680 $ 27,040 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…arrow_forwardHiram'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 $ 14,250 $ 102,920 $ 29,700 Total Activity 5,700 parties 12,400 diners 11,000 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. 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…arrow_forward
- 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 $ 15,950 $ 112,800 $ 33,480 Total Activity 5,500 parties 12,000 diners 10,800 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. 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…arrow_forwardHiram'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 $ 28,350 $ 113,160 $ 40,170 Total Activity 5,500 parties 12,300 diners 10,300 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 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…arrow_forwardCalculating and Interpreting Activity-Based Costing Data 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. 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. Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant.…arrow_forward
- For each of the following activities, select the most appropriate cost driver. Each cost driver may be used only once. Activity Cost Driver 1. Pay vendors Answer 2. Evaluate vendors Answer 3. Inspect raw materials Answer 4. Plan for purchases of raw materials Answer 5. Packaging Answer 6. Supervision Answer 7. Employee training Answer 8. Clean tables Answer 9. Machine maintenance Answer 10. Move in-process product from one work station to the next Answerarrow_forwardDurban Metal Products, Limited, of the Republic of South Africa makes speclalty metal parts used In applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for Internal decislon-making purposes. The company has four actlvity cost pools as listed below: Activity Rate $ 17.70 per direct labor-hour $ 358.08 per customer order $ 78.08 per testing hour $ 1,492.00 per sales call Activity Cost Pool Order size Activity Measure Number of direct labor-hours Customer orders Number of custoner orders Product testing Selling Number of testing hours Number of sales calls The managing director of the company would like Information concerning the cost of a recently completed order for heavy- duty traller axles. The order requlred 100 direct labor-hours, 17 hours of product testing, and 5 sales calls. Required: What Is the total overhead cost assigned to the order for heavy-duty traller axles? Activity Cost…arrow_forwardHow is activity-based costing different from traditional costing systems? If a restaurant decided to use an activity-based costing system, please share 1-2 examples at each of the following levels: Customer, Group, Service and Facility.arrow_forward
- implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system Driver and guard wages Vehicle operating expense Vehicle depreciation. Customer representative salaries and i expenses office expenses Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and expenses office expenses Administrative expenses Administrative expenses Total cost The distribution of resource consumption across the activity cost pools is as follows. Pickup and Delivery 35% 5% $1,000,000 510,000 390,000 Driver and guard wages Vehicle…arrow_forwardPlease solve the task by reading attached pictures of background knowledge. Christine wants to improve the profit situation of her company - and learn more about the profit per product for the past month. Christine is a follower of a full costing approach. Therefore all the costs should be allocated to the products. Perform this calculation by calculating three alternatives for the distribution of fixed overheads:? •Distribution in equal parts? •Distribution proportional to sales ? •Distribution proportional to sales. All three allocation keys are common allocation routes in practice. Which one should Christine prefer?arrow_forwardHiram's Lakeside is a popular restaurant located on Lake Washington in Seattle. The restaurant's owner wants to better understand his costs and hired a student intern to conduct an activity-based costing study. The intern identified three activities, completed the first- stage cost allocations and gathered the activity measure data shown 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 $ 11,130 $ 104,490 $ 23,690 Total Activity 5,300 parties 12,900 diners 10,300 drinks The above costs exclude 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. Prior to the activity-based…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY