Sharp Motor Company has two operating divisions-on Auto Division and a Truck div

ID: 2467074 • Letter: S

Question

Sharp Motor Company has two operating divisions-on Auto Division and a Truck division. The company has a cafeteria that serves the employees of both derisions. The coats of operating the cafeteria are budgeted at $87,000 per month plus 40.08 per meal served. The company pays all the coat of the meals How much cafeteria coat should be charged to each division for June? Assume that toe company follows the practice of allocating all cafeteria costs incurred each month to the divisions in proportion to the number of meals served to each division during the month. On this basis how much cost would be allocated to each division for June?

Explanation / Answer

Cost charged

Variable cost

.80 *69,000 = 55,200

.80*69,000 = 55,200

Fixed cost

87,000@67%=58,290

87,000@33%=28,710

Total cost charged

$113,490

$83,910

(2) Allocated cost

Actual cost

Variable

122,400

Actual fixed cost

95,000

Total cost

217,400

Cost allocated to each division is 108,700 to Auto and 108,700 to truck since both division has same meals served