Cindy’s Restaurant has three revenue divisions with direct costs and average monthly figures given in the following information:

The restaurant also has the following indirect, undistributed costs:

a. Prepare a consolidated contributory income statement showing each of the three divisions side by side for comparison. Do not allocate indirect costs.

b. Allocate the indirect costs to the divisions and prepare a departmental income statement for each division. Administrative, general, and marketing costs are allocated based on sales revenue. The remaining indirect costs are allocated based on square footage used by each division:
Dining 2,400 sq. ft.
Banquet 3,000, sq. ft.
Beverage 600 sq. ft.

c. After allocating the indirect costs, would you consider closing any of the divisions? Why or why not?

Transcribed Image Text:

Dining Room Banquet Room Beverages Sales revenue $202,000 $108,000 $90,000 Cost of sales 81,000 41,000 28,000 Wages and salaries cost 64,455 34,795 12,000 Other direct costs 18,640 8,960 1,600