Konig Enterprises, Limited, owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $890,000 and were allocated as follows: Total Total sales-Last Year Percentage of total sales $ 60,000,000 $ 890,000 35% $ 311,500 100% Allocation (based on the above percentages) This year the Imperial Garden restaurant increased its sales by $15 million. The sales levels in the other two restaurants remained unchanged. The company's sales data for this year were as follows: Rick's Harborside $ 27,000,000 Rick's Harborside $ 27,000,000 Restaurants Imperial Garden $ 21,000,000 45% $ 400,500 Restaurants Imperial Garden $36,000,000 Total sales-This Year Percentage of total sales 48% Fixed administrative expenses for this year remained unchanged at $890,000. Ginger Nok $ 12,000,000 16% Ginger Wok $ 12,000,000 $ 178,000 20% Total $ 75,000,000 100% Required: 1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this year 2. Calculate the change in each restaurant's allocated cost from last year to this year. 3. Is sales dollars a good base for allocation of fixed costs?
Konig Enterprises, Limited, owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $890,000 and were allocated as follows: Total Total sales-Last Year Percentage of total sales $ 60,000,000 $ 890,000 35% $ 311,500 100% Allocation (based on the above percentages) This year the Imperial Garden restaurant increased its sales by $15 million. The sales levels in the other two restaurants remained unchanged. The company's sales data for this year were as follows: Rick's Harborside $ 27,000,000 Rick's Harborside $ 27,000,000 Restaurants Imperial Garden $ 21,000,000 45% $ 400,500 Restaurants Imperial Garden $36,000,000 Total sales-This Year Percentage of total sales 48% Fixed administrative expenses for this year remained unchanged at $890,000. Ginger Nok $ 12,000,000 16% Ginger Wok $ 12,000,000 $ 178,000 20% Total $ 75,000,000 100% Required: 1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this year 2. Calculate the change in each restaurant's allocated cost from last year to this year. 3. Is sales dollars a good base for allocation of fixed costs?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Konig Enterprises, Limited, owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative
expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $890,000 and were
allocated as follows:
Rick's Harborside
$ 27,000,000
Rick's Harborside
$ 27,000,000
Restaurants
Imperial Garden
$36,000,000
Restaurants.
Imperial Garden.
$ 21,000,000
$311,500
Total sales-Last Year
Percentage of total sales
45%
$ 400,500
Allocation (based on the above percentages)
This year the Imperial Garden restaurant increased its sales by $15 million. The sales levels in the other two restaurants remained
unchanged. The company's sales data for this year were as follows:
48%
Ginger Nok
$ 12,000,000
Total sales-This Year
Percentage of total sales
Fixed administrative expenses for this year remained unchanged at $890,000.
16%
Ginger Wok
$ 12,000,000
35%
$ 178,000
Total
$ 75,000,000
20%
100%
Total
$ 60,000,000
100%
$ 890,000
Required:
1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for
this year
2. Calculate the change in each restaurant's allocated cost from last year to this year.
3. Is sales dollars a good base for allocation of fixed costs?
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this
year.
2. Calculate the change in each restaurant's allocated cost from last year to this year. (Negative amounts should be indicated by a minus
sign.)
1. Fixed administrative expense allocation current year
2. Change in allocated cost
Rick's
Harborside
Reg 1 and 2
Imperial
Garden
Req 3 >
Ginger Wok
$
$
Total
0
0
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