Accounting Word Problem
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1.J. T. Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment.The fixed operating cost of the company is $20,000 per month. The owner wants all costs allocated to either the sale of burgers or hot dogs. Other items, mostly drinks and fries, are sold in equal proportions on a per order basis. The following information is provided for the operations of the company.
Burgers Hot Dogs
Budget Sales 3,000 2,000
Actual Sales 2,500 1,500
Required:
a.Compute the cost assigned to each food item if budgeted sales are used as the allocation base.
b.Compute the cost assigned to each food item if actual sales is used as the base.
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Solution Summary
This discusses allocation base of sales.
Solution Preview
a) For budgeted sales, burgers have 3000 out of 5000, or 3/5. Hot dogs have 2000 out of 5000, or 2/5. So burgers ...
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