Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. During 2013, the fixed administrative expenses totaled $2,000,000. These expenses were allocated as follows:

During 2014, the following year, the Imperial Garden restaurant increased its sales by $10 million. The sales levels in the other two restaurants remained unchanged. The company's 2014 sales data were as follows:

Fixed administrative expenses remained unchanged at $2,000,000 during 2014.
Required:
1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for 2014.
2. Compare your allocation from requirement 1 to the allocation for 2013. As the manager of the
Imperial Garden, how would you feel about the amount that has been charged to you for 2014?
3. Comment on the usefulness of sales dollars as an allocation base?

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Restaurants Rick's Harborside Imperial Garden Ginger Wok Total Total sales-2013.. Percentage of total sales Allocation (based on the 40% 37.5% 22.5% 100% $800,000 $750,000 $450,000 $2,000,000 Restaurants Rick's Harborside Imperial Garden Ginger Wok Total Total sales-2014. Percentage of total sales... $16,000,000 $25,000,000 $9,000,000 $50,000,000 100% 32% 50% 18%