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 allocated to the operating department using a dual-rate basis with the fixed cost allocation based on number of employees is:
A) $33,167
B) $31,683
C) $24,833
D) $41,500

Question

Quizplus · Accepted Answer

The fixed cost is allocated based on the number of employees: 800 production and 400 administrative. The variable cost is based on meals served. Fixed cost per employee = $25,000 / (800 + 400) = $20.83. Total fixed cost for production = 800 * $20.83 = $16,667. Variable cost for production = 5,500 meals * $3 = $16,500. Total cost for production = $16,667 + $16,500 = $33,167.

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