Smith Restaurants operates 3 locations. Overhead is split between the 3 three restaurants based on square footage: A has 10,000 sq ft, B has 12,000 sq ft, and C has 14,000 sq ft. Overhead is composed of rent and insurance: $300,000; advertising: $240,000; corporate accounting and services: $180,000. What would the using square footage? $ would be charged $ per square foot and A would be charged $ B and C would be charged $ for a total of $720,000. Analysis showed that the overhead costs had different drivers. The chart below shows this information: cost rent & insurance advertising corp accounting driver Restaurant B 12,000 $750,000 12 Restaurant C 14,000 $1,250,000 18 Restaurant A square footage revenues 10,000 $1,000,000 # of employees 15 Using this information, the rate to spread the rent and insurance cost is $ per sq foot; for advertising it is $ per dollar of revenue and $ per employee for corp accounting.
Smith Restaurants operates 3 locations. Overhead is split between the 3 three restaurants based on square footage: A has 10,000 sq ft, B has 12,000 sq ft, and C has 14,000 sq ft. Overhead is composed of rent and insurance: $300,000; advertising: $240,000; corporate accounting and services: $180,000. What would the using square footage? $ would be charged $ per square foot and A would be charged $ B and C would be charged $ for a total of $720,000. Analysis showed that the overhead costs had different drivers. The chart below shows this information: cost rent & insurance advertising corp accounting driver Restaurant B 12,000 $750,000 12 Restaurant C 14,000 $1,250,000 18 Restaurant A square footage revenues 10,000 $1,000,000 # of employees 15 Using this information, the rate to spread the rent and insurance cost is $ per sq foot; for advertising it is $ per dollar of revenue and $ per employee for corp accounting.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Smith Restaurants operates 3 locations. Overhead is split between the 3 three restaurants based on square footage: A has 10,000 sq
ft, B has 12,000 sq ft, and C has 14,000 sq ft. Overhead is composed of rent and insurance: $300,000; advertising: $240,000;
corporate accounting and services: $180,000.
What would the using square footage? $
would be charged $
per square foot and A would be charged $
and C would be charged $
for a total of $720,000.
Analysis showed that the overhead costs had different drivers. The chart below shows this information:
cost
driver
Restaurant A
Restaurant B
Restaurant C
12,000
$750,000
12
14,000
$1,250,000
18
rent & insurance
square footage
10,000
advertising
corp accounting
revenues
$1,000,000
# of employees
15
Using this information, the rate to spread the rent and insurance cost is $
per sq foot; for advertising it is $
per dollar of revenue and $
per employee for corp accounting.
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