Sharp Motor Company has two operating divisions—an Auto Division
and a Truck Division. The company has a cafeteria that serves the
employees of both divisions. The costs of operating the cafeteria
are budgeted at $79,000 per month plus $0.60 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 61% of the
peak-period requirements, and the Truck Division is responsible for
the other 39%.
For June, the Auto Division estimated it would need 94,000 meals
served, and the Truck Division estimated it would need 64,000 meals
served. However, due to unexpected layoffs of employees during the
month, only 64,000 meals were served to the Auto Division. Another
64,000 meals were served to the Truck Division as planned.
The cafeteria's actual fixed costs for June totaled $85,000 and
its actual meal costs totaled $92,800.
Required:
1. How much cafeteria cost should be charged to each division
for June?
2. Assume the company follows the practice of
allocating all cafeteria costs incurred each
month to the divisions in proportion to the number of meals served
to each division during the month. On this basis, how much cost
would be allocated to each division for June? (Round
your intermediate calculations to 2 decimal places.)
Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria that
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