Fixed administrative expenses for this year remained unchanged at $970,000. Required: 1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among t 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?

Fixed administrative expenses for this year remained unchanged at $970,000. Required: 1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among t 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

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 11E: Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant,...

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Park and West, LLC, provides consulting services to retail merchandisers in the Midwest. In 2019, they generated $720,000 in service revenue. Their total cost (fixed and variable) per client was $2,500 and they served 115 clients during the year. If operating expenses for the year were $302,000 what was their net income?
Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of 25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is 1,100 per year. In addition to the salaries, Elliott spends 27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. 4. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing costs are relevant? By how much will purchasing costs increase if the order is accepted? (b) Suppose that the special order causes 700 additional purchase orders. How will your answer to (a) change?
Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands): The income tax rate for Xenold, Inc., is 40 percent. Xenold, Inc., has two sources of financing: bonds paying 5 percent interest, which account for 25 percent of total investment, and equity accounting for the remaining 75 percent of total investment. Xenold, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Xenold stock has an opportunity cost of 5 percent over the 4 percent long-term government bond rate. Xenolds total capital employed is 5.04 million (2,600,000 for the Home Division, 1,700,000 for the Restaurant Division, and the remainder for the Specialty Division). Required: 1. Prepare a segmented income statement for Xenold, Inc., for last year. 2. Calculate Xenolds weighted average cost of capital. (Round to four significant digits.) 3. Calculate EVA for each division and for Xenold, Inc. 4. Comment on the performance of each of the divisions.
Merton Electronics operates two retail outlets in Port Wren, one downtown and the other in Docklands. The stores share the use of a corporate staff responsible for functions such as personnel, IT, marketing, purchasing, and so on. The cost of the corporate activities for last year was $162,000. The following are the operating results for the two stores for the year: Downtown Docklands Sales revenue $ 720,000 $ 900,000 Number of employees 45 30 Required: Allocate the cost of the corporate activities to the two stores based on: Number of employees. store revenue.
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,100 kayaks and sold 850 at a price of $1,100 each. At year-end, the company reported the following income statement information using absorption costing. Sales (850 × $1,100) $ 935,000 Cost of goods sold (850 × $425) 361,250 Gross profit 573,750 Selling and administrative expenses 220,000 Income $ 353,750 Additional Information a. Product cost per kayak under absorption costing totals $425, which consists of $325 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $110,000 of fixed overhead per year divided by 1,100 kayaks produced.b. The $220,000 in selling and administrative expenses consists of $85,000 that is variable and $135,000 that is fixed.Prepare an income statement for the current year under variable costing.
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Lalia rents 110,000 square feet of store space for $358,000 per year. The amount of square footage by department is shown below: Department A 45,000 square feet Department B 30,000 square feet Department C 18,000 square feet Department D 17,000 square feet Help allocate the annual rent expense among the four departments on the basis of relative square feet of floor space occupied.
For a recent year, McDugal's company-owned restaurants had the following sales and expenses (in millions): Sales $34,200 Food and packaging $11,734 Payroll 9,100 Occupancy (rent, depreciation, etc.) 8,166 General, selling, and admin. expenses 5,200 Other expense 680 Total expenses (34,880) Operating income (loss) $(680) Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is McDonald's contribution margin? Enter your answer in million, rounded to one decimal place.$fill in the blank 1 million b. What is McDonald's contribution margin ratio? Round your percentage answer to one decimal place.fill in the blank 2 % c. How much would operating income increase if same-store sales increased by $2,100 million for the coming year, with no change in the contribution margin ratio or fixed costs?$fill in the blank 3 million d. What would have been the operating…
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Gloden Company operates a retail store in Faith, Hope, and Love. Golden Company’s corporate headquarters is located in Manila, and the company uses responsibility accounting to evaluate performance. The following information relates to the Faith facility:· The store sold 100,000 units at P20.00 each, after having purchased the units from various suppliers for P13. Faith salespeople are paid a 10% commission based on gross sales pesos.· Faith’s sales manager oversees the placement of local advertising contracts, which cost P88,000 and 5% of gross sales pesos. Local property taxes amounted to P15,000.· The sales manager’s P95,000 salary is set by Faith’s store manager. In contrast, the store manager’s P120,000 salary is determined by National Company’s vice president.· Faith incurred P20,000 of other noncontrollable costs along with P10,000 of income tax expense.· Nontraceable (common) corporate overhead totaled P68,000.The income that will be used to evaluate the manager of Faith…
Kraft Bowlen owns two sports franchises—the Bladers (a hockey team) and the Ballers (a basketball team). The following information was provided for the coming year. Bladers Ballers Sales $80,000,000 $180,000,000 Variable cost of goods sold 10,000,000 30,000,000 Direct fixed overhead 20,000,000 100,000,000 A sales commission of 5% of sales revenue is paid for each of the two sports franchises. Direct fixed selling and administrative expense was estimated to be $4,000,000 for the Bladers franchise and $10,000,000 for the Ballers franchise. Common fixed overhead associated with owning the franchises was estimated to be $18,000,000; common selling and administrative expense was estimated to be $8,000,000. Required: Prepare a segmented income statement for Kraft Bowlen for the coming year, using variable costing. Note: Enter all amounts as positive numbers except operating loss, if applicable. Kraft Bowlen Segmented Income Statement For the Coming Year Bladers…