Sonora Sam's is a chain of restaurants serving Sonora-style Mexican food in a family-type atmosphere. The chain has grown from one restaurant in 1995 to five restaurants located in west Texas and New Mexico. In 2001, the owner of the company decided to set up an internal Accounting Department to centralize control of financial information. (Previously, local CPAs handled each restaurant's bookkeeping and financial reporting.) The accounting office was opened in January 2001 by renting space adjacent to corporate headquarters in Albuquerque, New Mexico. All restaurants have been supplied with personal computers and modems by which to transfer information to central accounting on a weekly basis.

The Accounting Department has budgeted fixed costs of $64,000 per year. Variable costs are budgeted at $18 per hour. In 2001, actual cost for the Accounting Department was

$131,500. Further information is as follows:

Required:
1. Suppose the total costs of the Accounting Department are allocated on the basis of 2001 sales revenue. How much will be allocated to each restaurant?
2. Suppose that Sonora Sam's views 2000 sales figures as a proxy for budgeted capacity of the restaurants. Thus, fixed Accounting Center costs are allocated on the basis of 2000 sales, and variable costs are allocated according to 2001 usage multiplied by the vari¬
able rate/How much Accounting Department cost will be allocated to each restaurant?
3. Comment on the two allocation schemes. Which restaurants would prefer the method in Requirement 1? the method in Requirement 2? Explain.

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Actual Revenues Actual Hours of Accounting Used in 2001 2000 2001 El Paso $337,500 $390,500 1,475 Albuquerque 450,000 456,000 400 Taos 360,000 375,000 938 Tucumcari 540,000 550,000 562 Amarillo 562,500 549,000 375