5 Cindys Restaurant has three sales revenue departments with direct costs and average monthly figures given in the following information:

Departments Dining Banquets Beverages Sales revenue $204,000 $110,000 $92,000

Cost of sales 81,600 41,800 29,440

Wages and salaries cost 65,280 35,200 12,880

Other direct costs 18,360 8,800 1,840

The restaurant also has the following indirect, undistributed costs:

Administrative and general expenses $12,000

Marketing expenses 10,000

Utilities expense 5,000

Property operation and maintenance 12,120

Depreciation expense 14,000

Insurance expense 4,000

a. Prepare a consolidated departmental 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 showing each of the three divisions side by side for comparison. 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: Round all percentage calculations to a whole percentage. 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?

P2.6 With reference to the information provided for Cindys Restaurant in Problem 2.5 (round all percentage calculations to a whole percentage):

a. Calculate the contributory income percentage for each of the three divisions.

b. Using the information in Problem 2.5, calculate the cost of sales, wages and salaries costs, and other direct costs as a percentage of sales revenue for each of the divisions.

c. If there were a shift of $8,000 in sales revenue from the banquet area to the dining room, would you expect the restaurants overall operating income to increase or decrease? Explain your reasoning to support your answer.

d. Assuming that the shift of $8,000 of sales revenue does occur, total sales revenue will not change. Total indirect, undistributed costs will not change. Cost of sales, wages and salaries costs, and other direct costs must be recalculated for each division to find the new departmental total operating income.

I only need C. and D. for 2.6 answered