Excellent question! I would recommend using M1401L: Activity Pre-Assignment Roster by Activity Schedule (Avery 5160). This report is designed
to print Avery 5160 labels for individuals that have a participant
assignment to a particular activity. It will sort the individuals by
Activity Group, Room-Location, and Activity Schedule.
The first filter on this specific report is 'Report Type'. This allows you to choose to list each individual on a separate label or group individuals within a household on the same label.