Question: Total salesLast Year $ 24,000,000 $ 21,000,000 $ 15,000,000 $ 60,000,000 Percentage of total sales 40% 35% 25% 100% Allocation (based on the above percentages)
| Total salesLast Year | $ 24,000,000 | $ 21,000,000 | $ 15,000,000 | $ 60,000,000 |
|---|---|---|---|---|
| Percentage of total sales | 40% | 35% | 25% | 100% |
| Allocation (based on the above percentages) | $ 336,000 | $ 294,000 | $ 210,000 | $ 840,000 |
This year the Imperial Garden restaurant increased its sales by $15 million. The sales levels in the other two restaurants remained unchanged. The companys sales data for this year were as follows:
| Restaurants | Total | |||
|---|---|---|---|---|
| Ricks Harborside | Imperial Garden | Ginger Wok | ||
| Total salesThis Year | $ 24,000,000 | $ 36,000,000 | $ 15,000,000 | $ 75,000,000 |
| Percentage of total sales | 32% | 48% | 20% | 100% |
Fixed administrative expenses for this year remained unchanged at $840,000.
Required:
1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this year.
2. Calculate the change in each restaurants allocated cost from last year to this year.
3. Is sales dollars a good base for allocation of fixed costs?
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