Question
Sharp Motor Company has a cafeteria that serves two operating divisionsan Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted
Sharp Motor Company has a cafeteria that serves two operating divisionsan Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted at $90,000 per month plus $0.50 per meal served.
The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 66% of the peak-period requirements, and the Truck Division is responsible for the other 34%.
For June, the Auto Division estimated it would need 81,000 meals, and the Truck Division estimated it would need 51,000 meals. However, due to unexpected layoffs of employees during the month, only 51,000 meals were served to the Auto Division. Another 51,000 meals were served to the Truck Division as planned.
The cafeteria's actual fixed costs for June totaled $98,000 and its actual meal costs totaled $66,000.
Required:
How much cafeteria cost should be charged to each division for June?
Assume the company follows the practice of allocating all cafeteria costs to the divisions based on the number of meals served. On this basis, how much cost would be allocated to each division for June?
Note: Round your intermediate calculations to 2 decimal places. Total Cost Charged / Total cost allocated Auto Division Truck Division
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started