P2.5 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

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.

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 f$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.