Question - Cindy's Restaurant has three sales revenue departments with direct costs and average monthly figures given in the following information:
|
Departments
|
Dining
|
Banquets
|
Beverages
|
|
Sales revenue
|
$204,000
|
S I 10,000
|
592,000
|
|
Cost of sales
|
81,600
|
41,800
|
29.440
|
|
Wages and salaries cost
|
65.280
|
35.200
|
12.880
|
|
Other direct costs
|
18,360
|
8.800
|
1.840
|
The restaurant also has the following indirect, undistributed costs:
|
Administrative and general expenses
|
512.000
|
|
Marketing expenses
|
10.000
|
|
Utilities expense
|
5.000
|
|
Property operation and maintenance
|
12.120
|
|
Depreciation expense
|
14.000
|
|
Insurance expense
|
4,000
|
a. Prepare a consolidated departmental contributory income statement showing each of the three divisions side by side for comparison. Do not allocate indirect costs.
b. Allocate the indirect costs to the divisions and prepare a departmental income statement showing each of the three divisions side by side for comparison. Administrative, general, and marketing costs are allocated based on sales revenue. The remaining indirect costs are allocated based on square footage used by each division: Round all percentage calculations to a whole percentage.
Dining 2.400 sq. ft. Banquet 3.000. sq. ft. Beverage 600 sq. ft.
c. Alter allocating the indirect costs. would you consider closing any of the divisions? Why or why not?