Sharp Motor Company has two operating divisions-an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $83,000 per month plus $0.80 per meal served. The company pays all the cost of the meals. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 64% of the peak- period requirements, and the Truck Division is responsible for the other 36%. For June, the Auto Division estimated it would need 98,000 meals served, and the Truck Division estimated it would need 68,000 meals served. However, due to unexpected layoffs of employees during the month, only 68,000 meals were served to the Auto Division. Another 68,000 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 $120,800. 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 incurred each month to the divisions in proportion to the number of meals served to each division during the month. 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 two operating divisions-an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $83,000 per month plus $0.80 per meal served. The company pays all the cost of the meals. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 64% of the peak- period requirements, and the Truck Division is responsible for the other 36%. For June, the Auto Division estimated it would need 98,000 meals served, and the Truck Division estimated it would need 68,000 meals served. However, due to unexpected layoffs of employees during the month, only 68,000 meals were served to the Auto Division. Another 68,000 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 $120,800. 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 incurred each month to the divisions in proportion to the number of meals served to each division during the month. On this basis, how much cost would be allocated to each division for June? Note: Round your intermediate calculations to 2 decimal places.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 7E: Columbia Products Inc. has two divisions, Salem and Seaside. For the month ended March 31, Salem had...
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Transcribed Image Text:Sharp Motor Company has two operating divisions-an Auto Division and a Truck Division. The company has a cafeteria that serves
the employees of both divisions. The costs of operating the cafeteria are budgeted at $83,000 per month plus $0.80 per meal served.
The company pays all the cost of the meals.
The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 64% of the peak-
period requirements, and the Truck Division is responsible for the other 36%.
For June, the Auto Division estimated it would need 98,000 meals served, and the Truck Division estimated it would need 68,000
meals served. However, due to unexpected layoffs of employees during the month, only 68,000 meals were served to the Auto
Division. Another 68,000 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 $120,800.
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 incurred each month to the divisions in proportion to the
number of meals served to each division during the month. 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
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