1. The first step is to determine the activity rates:
Activity Cost Pools (a)
Total Cost (b)
Total Activity (a) ÷ (b)
Activity Rate
Serving parties... $33,000 6,000 parties $5.50 per party
Serving diners... $138,000 15,000 diners $9.20 per diner
Serving drinks... $24,000 10,000 drinks $2.40 per drink
According to the activity-based costing system, the cost of serving each
of the parties can be computed as follows:
a. Party of 4 persons who order a total of 3 drinks:
Activity Cost Pool (a)
Activity Rate (b)
Activity (a) × (b)
ABC Cost
Serving parties ... $5.50 per party 1 party $ 5.50
Serving diners ... $9.20 per diner 4 diners 36.80
Serving drinks ... $2.40 per drink 3 drinks 7.20
Total... $49.50
b. Party of 2 persons who order no drinks:
Serving diners ... $9.20 per diner 2 diners 18.40
Serving drinks ... $2.40 per drink 0 drinks 0
Total... $23.90
c. Party of 1 person who orders 2 drinks:
Serving diners ... $9.20 per diner 1 diner 9.20
Serving drinks ... $2.40 per drink 2 drinks 4.80
Total... $19.50
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