$ 4,500 Rent $ 1,800 Hamburger meat Buns, lettuce, pickles, and onions Frozen potato strips Wrappers, bags, and condiment packages Other ingredients Part-time employees' wages John Peterson's salary Utilities Depreciation, cooking equipment and fixtures 800 600 1,250 Advertising Janitor's wages Janitorial supplics Accounting fees Тахes 500 520 600 150 660 1,500 7,250 4,250 3,000 1,500 Manufacturing Overhead Selling and Administrative Direct Direct Cost Materials Labor Hamburger meat $4,500 Totals
Manufacturing, Cost Classification, Product Costs and Selling and
Administrative Costs, Income Statement
Pop's Drive-Thru Burger Heaven produces and sells quarter-pound
hamburgers. Each burger is wrapped and put in a "burger bag," which
also includes a serving of fries and a soft drink. The price for the burger
bag is $3.50. During December, 10,000 burger bags were sold. The
restaurant employs college students part time to cook and fill orders.
There is one supervisor (the owner, John Peterson). Pop's maintains a
pool of part-time employees so that the number of employees scheduled
can be adjusted to the changes in demand. Demand varies on a weekly
as well as a monthly basis.
A janitor is hired to clean the building early each morning. Cleaning
supplies are used by the janitor, as well as the staff, to wipe counters,
wash cooking equipment, and so on. The building is leased from a local
real estate company; it has no seating capacity. All orders are filled on a
drive-thru basis.
The supervisor schedules work, opens the building, counts the cash,
advertises, and is responsible for hiring and firing. The following costs
were incurred during December:
Pop's accountant, Elena DeMarco, does the bookkeeping, handles
payroll, and files all necessary taxes. She noted that there were no
beginning or ending inventories of materials. To simplify accounting for
costs, Elena assumed that all part-time employees are production
employees and that John Peterson's salary is selling and administrative
expense. She further assumed that all rent and
the building and fixtures are part of product cost. Finally, she decided to
put all taxes into one category, taxes, and to treat them as administrative
expense.
Required
1. Classify each of the costs for Pop's December operations using
the table format given below. Be sure to total the amounts in each
column.
Example: Hamburger meat, $4,500.
2. Prepare an income statement for the month of December.
3. CONCEPTUAL CONNECTION Elena made some simplifying
assumptions. Were those reasonable? Suppose a good case could
be made that the portion of the employees' time spent selling the
burger bags was really a part of sales. In that case, would it be
better to divide their time between production and selling? Should
John Peterson's time be divided between marketing and
administrative duties? What difference (if any) would that make on
the income statement?
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