Saved Help Save & E Che Sharp Motor Company has two operating divisions-an Auto
ID: 2524145 • Letter: S
Question
Saved Help Save & E Che Sharp Motor Company has two operating divisions-an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of opera The company pays all the cost of the meals. the cafeteria are budgeted at $77,000 per month plus $070 per meal served. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 69% of the peak. period requirements, and the Truck Division is responsible for the other 31% For June, the Auto Division estimated it would need 80,000 meals served, and the Truck Division estimated it would need 50,000 meals served. However, due to unexpected layoffs of employees during the month, only 50,000 meals were served to the Auto Division. Another 50,000 meals were served to the Truck Division as planned. Cost records in the cafeteria show that actual fixed costs for June totaled $83,000 and actual meal costs totaled $87000 Required: 1. How much cafeteria cost should be charged to each division for June? 2. As number of meals served to each division during the month. On this basis, how much cost would be allocated to each division for June? (Round your intermediate calculations to 2 decimal places proportion to the sume the company follows the practice of allocating all cafeteria costs incurred each month to the divisions in Truck Auto Division Division 1 Total cost charged 2 Total cost allocated K Prey 17 of 1NaxtExplanation / Answer
Answer:
Auto
division
Truck
division
Total cost charged
88130
58870
Total cost Allocated
85000
85000
Working notes for the above answer is as under
1
Auto
division
Truck
division
Variable cost
35000
35000
50,000*0.70
50,000*0.70
Fixed cost
53130
23870
77000*69%
77000*31%
Total Cost charged
88130
58870
2
Total cost
=Fixed cost+ variable cost
=83000+87000
=170,000
In the question it was given that, layoffs of employees during the month, only 50,000 meals were served to the Auto Division. Another 50,000 meals were served to the Truck Division as planned
So both the Division serves same number
So total fixed cost is Division between both the Division in 50:50 ratio as under
Auto
division
Truck
division
Total cost Allocated
85000
85000
170,000*50%
170,000*50%
Auto
division
Truck
division
Total cost charged
88130
58870
Total cost Allocated
85000
85000
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