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. During 2008, the fixed administrative expenses totaled $2,000,000. These expenses were allocated as follows:
Restaurants
Ricks's Harborside Imperial Garden GingerWok Total
Total sales-2008 $16,000,000 $15,000,000 $9,000,000 $40,000,000
Percentage of total sales 40% 37.5% 22.5% 100%
Allocation(based on the above percentages) $ 800,000 $ 750,000 $ 450,000 $ 2,000,000
During 2009, the following year, the Imperial Garden restaurant increased its sales by $10 million. The sales levels in the other two restaurants remained unchanged. The company's 2009 sales data were as follows:
Restaurants
Ricks's Harborside Imperial Garden Ginger Wok Total
Total sales-2009 $16,000,000 $25,000,000 $9,000,000 $50,000,000
Percentage of total sales 32% 50% 18% 100%
Fixed administrative expenses remained unchanged at $2,000,000 during 2009.
Requirement 1:
Using sales dollars as an allocation base, show the allocation of the fixed administrative expenses among the three restaurants for 2009. (Omit the "tiny_mce_markerquot; sign in your response.)
Allocation of 2009
Rick's Harborside $
Imperial Garden $
Ginger Wok $
Total $
Requirement 2:
(a)Compare your allocation from requirement (1) above to the allocation for 2008 and determine the increase or decrease in allocation. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be entered with a minus sign. Omit the "tiny_mce_markerquot; sign in your response.)
Increase (decrease) in allocation
Rick's Harborside $
Imperial Garden $
Ginger Wok $
Total $