Loose Leaf For Managerial Accounting for Managers
6th Edition
ISBN: 9781264445394
Author: Noreen, Eric, BREWER, Peter, Garrison, Ray
Publisher: McGraw Hill
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Textbook Question
Chapter 11, Problem 11.22P
Service Department Charges LO 11–4
Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria thatserves the employees of both divisions. The costs of operating the cafeteria are budgeted at $40,000 per month plus $3 per mealserved. 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 65% of thepeak-period requirements, and the Truck Division is responsible for the other 35%.
For June, the Auto Division estimated it would need 35,000 meals served, and the Truck Division estimated it would need20,000 meals served. However, due to unexpected layoffs of employees during the month, only 20,000 meals were served to theAuto Division. Another 20,000 meals were served to the Truck Division as planned.
The cafeteria’s actual fixed costs for June totaled $42,000, and its actual meal costs totaled $128,000.
Required:
- How much cafeteria cost should be charged to each division for June?
- Assume the company follows the practice of allocating all cafeteria costs incurred each month to the divisions in proportion tothe number of meals served to each division during the month. On this basis, how much cost would be allocated to each division for June?
- What criticisms can you make of the allocation method used in part (2) above?
- If managers of operating departments know that fixed service costs are going to be allocated on the basis of peak-periodrequirements, what will be their probable strategy as they report their estimate of peak-period requirements to the company’sbudget committee? As a member of top management, what would you do to neutralize such strategies?
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Service Department Charges
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 $40,000 per month plus $3 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 65% of the peak-period requirements, and the Truck Division is responsible for the other 35%.
For June, the Auto Division estimated it would need 35,000 meals served, and the Truck Division estimated it would need 20,000 meals served. However, due to unexpected layoffs of employees during the month, only 20,000 meals were served to the Auto Division. Another 20,000 meals were served to the Truck Division as planned.
Cost records in the cafeteria show that actual fixed costs for June totaled $42,000 and actual meal costs totaled $128,000.
Required:
1.…
nces
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 $78,000 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 57% of the peak-
period requirements, and the Truck Division is responsible for the other 43%.
For June, the Auto Division estimated it would need 94,000 meals served, and the Truck Division estimated it would need 64,000
meals served. However, due to unexpected layoffs of employees during the month, only 64,000 meals were served to the Auto
Division. Another 64,000 meals were served to the Truck Division as planned.
The cafeteria's actual fixed costs for June totaled $82,000 and its actual meal costs totaled $114,400.
Required:
1. How much cafeteria cost should be…
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 $73,000 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 59% of the peak-period requirements, and the Truck Division is responsible for the other 41%.
For June, the Auto Division estimated it would need 84,000 meals served, and the Truck Division estimated it would need 54,000 meals served. However, due to unexpected layoffs of employees during the month, only 54,000 meals were served to the Auto Division. Another 54,000 meals were served to the Truck Division as planned.
The cafeteria's actual fixed costs for June totaled $83,000 and its actual meal costs totaled $71,000.
Required:
1. How much cafeteria cost should be charged…
Chapter 11 Solutions
Loose Leaf For Managerial Accounting for Managers
Ch. 11 - Prob. 11.1QCh. 11 - Prob. 11.2QCh. 11 - Prob. 11.3QCh. 11 - Prob. 11.4QCh. 11 - Prob. 11.5QCh. 11 - Prob. 11.6QCh. 11 - Prob. 11.7QCh. 11 - Prob. 11.8QCh. 11 - Prob. 11.9QCh. 11 - Why is using sales dollars as an allocation base...
Ch. 11 - Prob. 1AECh. 11 - Prob. 1TF15Ch. 11 - Prob. 11.1ECh. 11 - Prob. 11.2ECh. 11 - Prob. 11.3ECh. 11 - Prob. 11.4ECh. 11 - Prob. 11.5ECh. 11 - Prob. 11.6ECh. 11 - Prob. 11.7ECh. 11 - Prob. 11.8ECh. 11 - Prob. 11.9ECh. 11 - Prob. 11.10ECh. 11 - Prob. 11.11ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Prob. 11.14ECh. 11 - Prob. 11.15ECh. 11 - Prob. 11.16ECh. 11 - Prob. 11.17PCh. 11 - Prob. 11.18PCh. 11 - Prob. 11.19PCh. 11 - Prob. 11.20PCh. 11 - Prob. 11.21PCh. 11 - Service Department Charges LO 11–4 Sharp Motor...Ch. 11 - Prob. 11.23PCh. 11 - Prob. 11.24PCh. 11 - Basic Transfer Pricing LO 11–3 Alpha and Beta...Ch. 11 - Prob. 11.26C
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