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Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment. ...

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Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment. ...

Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment. The fixed operating costs of the company are $5,000 per month. The controlling shareholder, interested in product profitability and pricing, wants all costs allocated to either the burgers or the hot dogs. The following information is provided for the operations of the company:

   Burgers   Hot Dogs
   Sales for January   4,000   2,400
   Sales for February   6,400   2,400

Required:
a.   What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?
b.   Hot dog sales for January and February remained constant. Did the amount of fixed operating costs allocated to hot dogs also remain constant for January and February? Explain why or why not. Comment on any other observations.

Textbook

Cost Accounting: A Managerial Emphasis, Canadian Edition

Edition: 7^th

Authors: Horngren, Datar, Rajan, Beaubien

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