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 $88,000 per month plus $0.50 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 61% of the peak-period requirements, and the Truck Division is responsible for the other 39%. For June, the Auto Division estimated it would need 91,000 meals served, and the Truck Division estimated it would need 61,000 meals served. However, due to unexpected layoffs of employees during the month, only 61,000 meals were served to the Auto Division. Another 61,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $92,000 and its actual meal costs totaled $76,000. 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 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? (Round your intermediate calculations to 2 decimal places.) 1. Total cost charged 2. Total cost allocated Auto Division Truck Division
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 $88,000 per month plus $0.50 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 61% of the peak-period requirements, and the Truck Division is responsible for the other 39%. For June, the Auto Division estimated it would need 91,000 meals served, and the Truck Division estimated it would need 61,000 meals served. However, due to unexpected layoffs of employees during the month, only 61,000 meals were served to the Auto Division. Another 61,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $92,000 and its actual meal costs totaled $76,000. 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 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? (Round your intermediate calculations to 2 decimal places.) 1. Total cost charged 2. Total cost allocated Auto Division Truck Division
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
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 $88,000 per month plus $0.50 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 61% of the
peak-period requirements, and the Truck Division is responsible for the other 39%.
For June, the Auto Division estimated it would need 91,000 meals served, and the Truck Division estimated it would need 61,000
meals served. However, due to unexpected layoffs of employees during the month, only 61,000 meals were served to the Auto
Division. Another 61,000 meals were served to the Truck Division as planned.
The cafeteria's actual fixed costs for June totaled $92,000 and its actual meal costs totaled $76,000.
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 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? (Round your intermediate calculations to 2 decimal places.)
1. Total cost charged
2. Total cost allocated
Auto
Division
Truck
Division
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education