60.1K

Verified Solution

Link Copied!

Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $850,000 and were allocated as follows:

	Restaurants
		Ricks Harborside				Imperial Garden				Ginger Wok				Total
Total salesLast Year	$	20,580,000			$	13,720,000			$	14,700,000			$	49,000,000
Percentage of total sales		42	%			28	%			30	%			100	%
Allocation (based on the above percentages)	$	357,000			$	238,000			$	255,000			$	850,000

This year the Imperial Garden restaurant increased its sales by $1 million. The sales levels in the other two restaurants remained unchanged. The companys sales data for this year were as follows:

	Restaurants
		Ricks Harborside				Imperial Garden				Ginger Wok				Total
Total salesThis Year	$	20,580,000			$	14,720,000			$	14,700,000			$	50,000,000
Percentage of total sales		41	%			30	%			29	%			100	%

Fixed administrative expenses for this year remained unchanged at $850,000.

Required:

1. Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for this year.

2. Calculate the change in each restaurants allocated cost from last year to this year.

3. Is sales dollars a good base for allocation of fixed costs?

*Please answer this correctly. This is my third time asking for help and the answer has been incorrect every time so far.*

Answer & Explanation Solved by verified expert

See Answer