Sharp Motor Company has two operating divisions—an Auto Divisionand a Truck Division. The company has a cafeteria that serves theemployees of both divisions. The costs of operating the cafeteriaare budgeted at $76,000 per month plus $0.50 per meal served. Thecompany pays all the cost of the meals.
The fixed costs of the cafeteria are determined by peak-periodrequirements. The Auto Division is responsible for 71% of thepeak-period requirements, and the Truck Division is responsible forthe other 29%.
For June, the Auto Division estimated it would need 86,000 mealsserved, and the Truck Division estimated it would need 56,000 mealsserved. However, due to unexpected layoffs of employees during themonth, only 56,000 meals were served to the Auto Division. Another56,000 meals were served to the Truck Division as planned.
Cost records in the cafeteria show that actual fixed costs forJune totaled $85,000 and actual meal costs totaled $76,000.
Required:
1. How much cafeteria cost should be charged to each divisionfor June?
2. Assume the company follows the practice of allocatingall cafeteria costs incurred each month to the divisionsin proportion to the number of meals served to each division duringthe month. On this basis, how much cost would be allocated to eachdivision for June? (Round your intermediate calculations to2 decimal places.)
