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Chap 11 Q3 Sharp Motor Company has two operating...

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Accounting

Chap 11 Q3

Sharp Motor Company has two operating divisionsan 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 $85,000 per month plus $0.50 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 58% of the peak-period requirements, and the Truck Division is responsible for the other 42%.

For June, the Auto Division estimated that it would need 81,000 meals served, and the Truck Division estimated that it would need 51,000 meals served. However, due to unexpected layoffs of employees during the month, only 51,000 meals were served to the Auto Division. Another 51,000 meals were served to the Truck Division as planned.

Cost records in the cafeteria show that actual fixed costs for June totaled $90,000 and that actual meal costs totaled $65,000.

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