1. Cindy’s Restaurant has three sales revenue departments with direct costs and average monthly figures given in the following information:

Departments	Dining	Banquets	Beverages
Sales Revenue	$204,000	$110,000	$92,000
Cost of sales	81,600	41,800	29,440
Wages and salaries cost	65,280	35,200	12,880
Other direct costs	18,360	8,800	1,840

Department	Dining	Banquet	Beverage
Cost of sales	(81600/204000)*100= 40%	(41800/110000)*100=38%	(294400/92000)*100=32%
Wages and salary	(65280/204000)*100=32%	(35200/110000)*100=32%	(128800/92000)*100=14%
other direct expenses	(18360/204000)100=9%	(8800/110000)*100=8%	(1840/92000)*100=2%

The restaurant also has the following indirect, undistributed costs: 

Administrative and general expenses $12,000 

Marketing expenses $10,000 

Utilities expense $5,000 

Property operation and maintenance $12,120 

Depreciation expense $14,000 Insurance expense $4,000

Dining 2,400 sq. ft. Banquet 3,000, sq. ft. Beverage 600 sq. ft.

2. With reference to the information provided for Cindy’s Restaurant in Problem 2.5 :

a. If there were a shift of $8,000 in sales revenue from the banquet area to the dining room, would you expect the restaurant’s overall operating income to increase or decrease? Explain your reasoning to support your answer.

b. Assuming that the shift of f$8,000 of sales revenue does occur, total sales revenue will not change. Total indirect, undistributed costs will not change. Cost of sales, wages and salaries costs, and other direct costs must be recalculated for each division to find the new departmental total operating income.

Answer rating: 100% (QA)

a calculate the contributory income percentage for each of the three div... View the full answer