Bradbo owned two adjoining restaurants, the Pork Palace and the Chicken Hut. Each restaurant was treated as a profit center for performance evaluation purposes. Although the restaurants had separate kitchens, they shared a central baking facility. The principal costs of the baking area included materials, supplies, labor, and depreciation and maintenance on the equipment.
Bradbo allocated the monthly costs of the baking facility to the two restaurants based on the number of tables served in each restaurant during the month using dual allocation and equal sharing of fixed costs. In April, the costs were $30,000, of which $16,000 were fixed. The Pork Palace served 4,400 tables, while the Chicken Hut served 3,600 tables.
The amount of joint cost that should have been allocated to the Pork Palace in April is calculated to be:

Question

Quizplus · Accepted Answer

First, we need to calculate the variable cost per table:
Variable cost per table = (Total baking facility costs - Fixed baking facility costs)/total tables served
Variable cost per table = ($30,000 - $16,000)/(4,400 + 3,600)
Variable cost per table = $14,000/8,000
Variable cost per table = $1.75

Then, we can allocate the joint costs to each restaurant:
Pork Palace joint cost = $1.75 x 4,400 = $7,700
Chicken Hut joint cost = $1.75 x 3,600 = $6,300

Therefore, the amount of joint cost that should have been allocated to the Pork Palace in April is $7,700 + 50% of the fixed costs ($16,000 x 50% = $8,000) = $15,700.

Bradbo Owned Two Adjoining Restaurants, the Pork Palace and the Chicken