Question : 81) Tuttles Drive-In a fast-food restaurant that sells burgers and hot : 1196092

81)

Tuttles Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 50’s environment. The fixed operating cost of the company is $8,000 per month. The owner wants all costs allocated to either the sale of burgers or hot dogs. Other items, mostly drinks and fries, are sold in equal proportions on a per order basis. The following information is provided for the operations of the company:

Burgers   Hot dogs

Average sales per month2,400800

Sales for January2,0001,200

Sales for February3,2001,200

Required:

a.Compute the cost assigned to each food item for January and February if actual sales are used as the allocation base.

b.Compute the cost per unit of food item if average sales per month are used as the base.

c.When using actual sales as the allocation base, what is unusual about results for the two products? 81)

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82)

Krum Lawn Equipment has five departments, of which Casting and Finishing are producing departments. Maintenance, product movement, and inspection are service departments. The distribution of the service departments is as follows:

Service CostsServices provided to:

Maint.      Prod. move.  Insp.  Cast.   Finish.

Maintenance$ 84,0005%25% 50% 20%

Product movement 160,00010%54540

Inspection

38,0001552060

Required:

Use the direct method to allocate the support departments’ costs. Prepare a schedule showing the total costs allocated to each department. 82)

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83)

Broadway Department Store allocates the personnel and payroll department costs to the sales departments of Shoes, Automotive, and Clothing. Human resources (personnel) and payroll also provide services to each other. Personnel costs are allocated by number of employees and payroll costs are allocated by gross payroll. Costs and other information for January were as follows:

Personnel  Payroll   Shoes  Automotive  Clothing

Current costs$13,800$6,400$24,400$40,000 $31,500

Gross payroll$3,000$1,500$5,600$8,700

$4,050

Number of employees538

15

4

Required:

Prepare a schedule, which includes the total cost of operating the sales departments for January. Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept. 83)

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84)

Campaign Printing has two service departments, S1 and S2, and two production departments, P1 and P2. The data for April were as follows:

Services provided to:

ActivityCostsS1 S2 P1 P2

S1$ 90,00010%40% 50%

S260,00020%55% 25%

P1360,000

P2520,000

Required:

a.Set up algebraic equations in linear equation form for each activity.

b.Solve equations from part a using the reciprocal method 84)

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85)

The maintenance department has been servicing the production of gizmos manufacturing for three years. During this time its costs have varied very little. Beginning next year the company is adding a scrap processing department to recycle the scrap materials from widget processing. It is anticipated that the maintenance department’s cost will increase from $960,000 to $1,000,000. The recycling department will utilize 20 percent of the maintenance efforts.

Required:

a.Calculate the allocation of the maintenance costs to gizmos and recycling if the incremental allocation method is used.

b.Calculate the allocation of the maintenance costs to gizmos and recycling if the stand-alone allocation method is used. 85)

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