Sven’s Cookhouse is a popular restaurant located on Lake Union 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. She then completed the first-stage allocations of costs to the activity cost pools using data from last month’s operations. The results appear below:Activity Cost PoolActivity MeasureTotal CostTotal ActivityServing a party of dinersNumber of parties served$19 4705 900partiesServing a dinerNumber of diners served$110 11012 100dinersServing a drinkNumber of drinks ordered$36 75010 500drinksThe above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent property taxes and top-management salaries. A group of diners who ask to sit at the same table are counted as a party. Some costs such as the costs of cleaning linen are the same whether one person is at a table or the table is full. Other costs such as washing dishes depend on the number of diners served.Prior to the activity-based costing study the owner knew very little about the costs of the restaurant. He 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.
