Pope Company operates a free cafeteria for the benefit of its employees. Budgeted and actual costs for the cafeteria last year are given below:
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Budget
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Actual
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Variable costs........
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$200,000
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$168,000
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Fixed costs.............
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$480,000
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$504,000
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The variable costs of the cafeteria are allocated to operating departments (Machining and Assembly) on the basis of the number of employees in these departments. Data concerning last year are given below:
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Machining
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Assembly
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Budgeted number of employees...................
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60
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100
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Actual number of employees........................
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40
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80
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Percentage of peak-period requirements......
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40%
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60%
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The budgeted fixed costs in the cafeteria are allocated by the peak-period requirements.
Required:
A. Compute the dollar amount of variable and fixed cost that should have been allocated to each of the operating departments at the beginning of last year for planning purposes, that is, allocate the fixed and variable overhead based on the budgeted costs.
Machining:
Assembly:
B. (1) Compute the dollar amount of the variable and fixed costs that should have been charged to each of the operating departments at the end of last year for purposes of evaluating performance. (HINT: Allocate the variable costs based on the actual cost driver; think about whether or not you would allocate the actual fixed overhead or the budgeted fixed overhead for evaluating performance.) (2) Identify the amount, if any, of actual cafeteria costs that should not be charged to Machining and Assembly. If the amount is $0, briefly discuss why. If there is any amount other than $0, also briefly discuss why.
Machining:
Assembly: