B. G. 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 Ratio
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.