# How would you assign the shared cost of depreciation for the cook- ing equipment to each product? I

Pop’s Burger Heaven produces and sells quarter-pound hamburgers. Each burger sells for \$1.50. During December, Pop’s sold 10,000 burgers (the average amount sold each month). The restaurant employs cooks, servers, and one supervisor (the owner, John Peterson). All cooks and servers are part-time employees. Pop’s maintains a pool of part-time employees so that the number of employees scheduled can be adjusted to the changes in demand. Demand varies on a weekly as well as a monthly basis.

A janitor is hired to clean the building on a weekly basis. The building is leased from a local real estate company. The building has no seating capabilities. All orders are filled on a drive-through basis.

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The supervisor schedules work, opens the building, counts the cash, adver- tises, and is responsible for hiring and firing. The following costs were incurred during December:

Hamburger meat . . . . . . . . \$1,600 Utilities . . . . . . . . . . . . . . . . . . . . . \$500 Lettuce . . . . . . . . . . . . . . . . . 300 Depreciation:

Tomatoes . . . . . . . . . . . . . . . 250 Cooking equipment……………………. 200

Buns . . . . . . . . . . . . . . . . . . . 300 Cash register…………………………….. 50

Other ingredients . . . . . . . . 20 Advertising…………………………………. 100

Cooks’ wages . . . . . . . . . . . 2,550 Janitor’s wages……………………………. 120

Servers’ wages . . . . . . . . . . . 2,032 Janitorial supplies…………………………. 50

Supervisor’s salary . . . . . . . 2,000 Rent……………………………………….. 800

Required

1. Classify each cost for Pop’s December operations into one of the following categories: direct materials, direct labor, overhead, or selling and administra- tive expenses.

2. Prepare an absorption-costing income statement for the month of December.

3. Suppose Pop’s also produces a grilled chicken sandwich and you want to determine the cost of producing both hamburgers and grilled chicken sand- wiches. How would you assign the shared cost of depreciation for the cook- ing equipment to each product? Is this direct tracing, driver tracing, or alloca- tion? Explain.

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