Part 1A Part 1B Sharp Motor Company has two operating divisions-an Auto DivMsion

Question

Part 1A

Part 1B

Sharp Motor Company has two operating divisions-an Auto DivMsion and a Truck Divislon. The company has a cafeterla that serves the employees of both divislons. The costs of operating the cafeterla are budgeted at $80,000 per month plus $0.70 per meal served. The company pays all the cost of the meals. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 66% of the peak- period requirements, and the Truck Division is responsible for the other 34%. For June, the Auto Divislon estimated It would need 95,000 meals served, and the Truck DivMsion estlmated It would need 65.000 meals served. However, due to unexpected layoffs of employees during the month, only 65.000 meals were served to the Auto DivMsIon. Another 65,000 meals were served to the Truck DivMslon as planned. Cost records In the cafeterla show that actual fixed costs for June totaled $84,000 and actual meal costs totaled $109.000. Required: 1. How much cafeterla cost should be charged to each division for June? 2 Assume the company follows the practice of allocating all cafeterla costs Incurred each month to the divislons In proportion to the number of meals served to each division during the month. On thls basis, how much cost would be allocated to each divislon for June? (Round your Intermediate calculations to 2 decimal places.) Auto Division Division 1. Total cost charged 2. Total cost allocated

Explanation / Answer

Part 1A :-

1) Total Cost Charged to :-

Auto Division = ($80000 * 66%) + (65000 * $0.70)

= $52800 + $45500

= $98300

Truck Division = ($80000 * 34%) + (65000 * $0.70)

= $27200 + $45500

= $72700

2) Total Cost Allocated :-

Auto Division = (($84000+$109000) / (65000+65000)) * 65000

= ($193000 / 130000) * 65000

= $96500

Truck Division = (($84000+$109000) / (65000+65000)) * 65000

= ($193000 / 130000) * 65000

= $96500

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