14-23 Fixed cost allocation. Three restaurants in a downtown area of a large cit
ID: 2413762 • Letter: 1
Question
14-23 Fixed cost allocation. Three restaurants in a downtown area of a large city have decided to share a valet service and parking lot for their customers. The cost of the service and lot is $10,000 per month. The owners of the restaurants need to decide how to divide the $10,000 cost. The actual usage, planned usage, and practical capacity in the month of May was: Actual Parking Planned Parking Practical Capacity Restaurant Spots Usedts Parking ,500 1,400 1,300 1,600 1,300 ,100 2,000 1,500 1,500Explanation / Answer
Answers
Restaurants
Actual parking Spots Used
% of total
$10,000 allocated as:
[A]
[B = A/Total]
[C = $10,000 x B]
A
1500
35.7143%
$ 3,571.43
B
1400
33.3333%
$ 3,333.33
C
1300
30.9524%
$ 3,095.24
TOTAL
4200
$ 10,000.00
Restaurants
Planned parking Spots Used
% of total
$10,000 allocated as:
[A]
[B = A/Total]
[C = $10,000 x B]
A
1600
40.0000%
$ 4,000.00
B
1300
32.5000%
$ 3,250.00
C
1100
27.5000%
$ 2,750.00
TOTAL
4000
$ 10,000.00
Restaurants
Practical capacity parking spot
% of total
$10,000 allocated as:
[A]
[B = A/Total]
[C = $10,000 x B]
A
2000
40.0000%
$ 4,000.00
B
1500
30.0000%
$ 3,000.00
C
1500
30.0000%
$ 3,000.00
TOTAL
5000
$ 10,000.00
The allocation method that makes more sense is the allocation based on ACTUAL PARKING SPOT USED.
This is because actual spots will change each period and allocation would be appropriate.
Restaurants
Actual parking Spots Used
% of total
$10,000 allocated as:
[A]
[B = A/Total]
[C = $10,000 x B]
A
1500
35.7143%
$ 3,571.43
B
1400
33.3333%
$ 3,333.33
C
1300
30.9524%
$ 3,095.24
TOTAL
4200
$ 10,000.00
Restaurants
Planned parking Spots Used
% of total
$10,000 allocated as:
[A]
[B = A/Total]
[C = $10,000 x B]
A
1600
40.0000%
$ 4,000.00
B
1300
32.5000%
$ 3,250.00
C
1100
27.5000%
$ 2,750.00
TOTAL
4000
$ 10,000.00
Restaurants
Practical capacity parking spot
% of total
$10,000 allocated as:
[A]
[B = A/Total]
[C = $10,000 x B]
A
2000
40.0000%
$ 4,000.00
B
1500
30.0000%
$ 3,000.00
C
1500
30.0000%
$ 3,000.00
TOTAL
5000
$ 10,000.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.