=+7-33 K Cost allocation, responsibility accounting, ethics (continuation of 7-32) OBJECTIVE 7 In 2015, only 760500 Freshfoods meals were produced and sold to the nursing homes. Josh Ahrens suspects that nursing home management accountants had systematically inflated their 2015 meal estimates.

Required 1 Recall that Freshfoods uses the master-budget capacity utilisation to allocate fixed costs and to price meals. What was the effect of the cost of unused capacity on Freshfoods’ operating profit in 2015?