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Sharp Motor Company has a cafeteria that serves two operating divisions-an Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted at $82,000 per month plus $0.50 per meal served. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 60% of the peak- period requirements, and the Truck Division is responsible for the other 40%. For June, the Auto Division estimated it would need 87,000 meals, and the Truck Division estimated it would need 57,000 meals. However, due to unexpected layoffs of employees during the month, only 57,000 meals were served to the Auto Division. Another 57,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $90,000 and its actual meal costs totaled $72,000. Required: 1. How much cafeteria cost should be charged to each division for June? 2. Assume the company follows the practice of allocating all cafeteria costs to the divisions based on the number of meals served. On this basis, how much cost would be allocated to each division for June? Note: Round your intermediate calculations to 2 decimal places.

Sharp Motor Company has a cafeteria that serves two operating divisions-an Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted at $82,000 per month plus $0.50 per meal served. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 60% of the peak- period requirements, and the Truck Division is responsible for the other 40%. For June, the Auto Division estimated it would need 87,000 meals, and the Truck Division estimated it would need 57,000 meals. However, due to unexpected layoffs of employees during the month, only 57,000 meals were served to the Auto Division. Another 57,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $90,000 and its actual meal costs totaled $72,000. Required: 1. How much cafeteria cost should be charged to each division for June? 2. Assume the company follows the practice of allocating all cafeteria costs to the divisions based on the number of meals served. On this basis, how much cost would be allocated to each division for June? Note: Round your intermediate calculations to 2 decimal places.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sharp Motor Company has a cafeteria that serves two operating divisions-an Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted at $82,000 per month plus $0.50 per meal served. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 60% of the peak- period requirements, and the Truck Division is responsible for the other 40%. For June, the Auto Division estimated it would need 87,000 meals, and the Truck Division estimated it would need 57,000 meals. However, due to unexpected layoffs of employees during the month, only 57,000 meals were served to the Auto Division. Another 57,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $90,000 and its actual meal costs totaled $72,000. Required: 1. How much cafeteria cost should be charged to each division for June? 2. Assume the company follows the practice of allocating all cafeteria costs to the divisions based on the number of meals served. On this basis, how much cost would be allocated to each division for June? Note: Round your intermediate calculations to 2 decimal places. 1. Total cost charged 2. Total cost allocated Auto Division Truck Division $81,000 $ 81,000
Transcribed Image Text:Sharp Motor Company has a cafeteria that serves two operating divisions-an Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted at $82,000 per month plus $0.50 per meal served. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 60% of the peak- period requirements, and the Truck Division is responsible for the other 40%. For June, the Auto Division estimated it would need 87,000 meals, and the Truck Division estimated it would need 57,000 meals. However, due to unexpected layoffs of employees during the month, only 57,000 meals were served to the Auto Division. Another 57,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $90,000 and its actual meal costs totaled $72,000. Required: 1. How much cafeteria cost should be charged to each division for June? 2. Assume the company follows the practice of allocating all cafeteria costs to the divisions based on the number of meals served. On this basis, how much cost would be allocated to each division for June? Note: Round your intermediate calculations to 2 decimal places. 1. Total cost charged 2. Total cost allocated Auto Division Truck Division $81,000 $ 81,000
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