Cervantes Industries provides an in-house cafeteria for production and administrative employees. This service costs $25,000 per month, plus $3 per meal served. The company has 800 production employees and 400 administrative employees. During the past month 5,500 meals were served to production employees and 2,000 to administrative.
The amount of cost allocated to the administrative department using actual meals served as the basis is:
A) $16,675
B) $12,667
C) $14,325
D) $18,500

Question

Quizplus · Accepted Answer

The total cost of the cafeteria service is the fixed cost plus the variable cost, which is $25,000 + ($3 * 7,500 meals) = $25,000 + $22,500 = $47,500. The cost allocated to the administrative department based on actual meals served is ($47,500 total cost / 7,500 total meals) * 2,000 administrative meals = $12,667.

Cervantes Industries Provides an In-House Cafeteria for Production and Administrative