Exercise 11B-2 Sales Dollars as an Allocation Base for Fixed Costs [LO11-6]

Konig Enterprises, Ltd., 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. During 2013, the fixed administrative expenses totaled $930,000. These expenses were allocated as follows:

Restaurants Ricks Harborside Imperial Garden Ginger Wok Total Total sales2013 $ 18,480,000 $ 10,920,000 $ 12,600,000 $ 42,000,000

Percentage of total sales 44 % 26 % 30 % 100 %

Allocation (based on the above percentages) $ 409,200 $ 241,800 $ 279,000 $ 930,000

During 2014, the following year, the Imperial Garden restaurant increased its sales by $10 million. The sales levels in the other two restaurants remained unchanged. The companys 2014 sales data were as follows:

Restaurants Ricks Harborside Imperial Garden Ginger Wok Total Total sales2014 $ 17,680,000 $ 22,360,000 $ 11,960,000 $ 52,000,000

Percentage of total sales 34 % 43 % 23 % 100 %

Fixed administrative expenses remained unchanged at $930,000 during 2014.

Required:

1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for 2014.

2. Compare your allocation from (1) above to the allocation for 2013 and determine the increase or decrease in allocation? (Decreases should be indicated by a minus sign.)