Konig Enterprises, Limited, owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $890,000 and were allocated as follows: Total Total sales-Last Year Percentage of total sales $ 60,000,000 $ 890,000 35% $ 311,500 100% Allocation (based on the above percentages) This year the Imperial Garden restaurant increased its sales by $15 million. The sales levels in the other two restaurants remained unchanged. The company's sales data for this year were as follows: Rick's Harborside $ 27,000,000 Rick's Harborside $ 27,000,000 Restaurants Imperial Garden $ 21,000,000 45% $ 400,500 Restaurants Imperial Garden $36,000,000 Total sales-This Year Percentage of total sales 48% Fixed administrative expenses for this year remained unchanged at $890,000. Ginger Nok $ 12,000,000 16% Ginger Wok $ 12,000,000 $ 178,000 20% Total $ 75,000,000 100% Required: 1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this year 2. Calculate the change in each restaurant's allocated cost from last year to this year. 3. Is sales dollars a good base for allocation of fixed costs?
Konig Enterprises, Limited, owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $890,000 and were allocated as follows: Total Total sales-Last Year Percentage of total sales $ 60,000,000 $ 890,000 35% $ 311,500 100% Allocation (based on the above percentages) This year the Imperial Garden restaurant increased its sales by $15 million. The sales levels in the other two restaurants remained unchanged. The company's sales data for this year were as follows: Rick's Harborside $ 27,000,000 Rick's Harborside $ 27,000,000 Restaurants Imperial Garden $ 21,000,000 45% $ 400,500 Restaurants Imperial Garden $36,000,000 Total sales-This Year Percentage of total sales 48% Fixed administrative expenses for this year remained unchanged at $890,000. Ginger Nok $ 12,000,000 16% Ginger Wok $ 12,000,000 $ 178,000 20% Total $ 75,000,000 100% Required: 1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this year 2. Calculate the change in each restaurant's allocated cost from last year to this year. 3. Is sales dollars a good base for allocation of fixed costs?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 6E: Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of...
Related questions
Question
Do not give image format
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning