Prepare a consolidated contributory income statement

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Reference no: EM131830665

Question: Cindy's Restaurant has three revenue divisions with direct costs and average monthly figures given in the following information:

	Dining Room	Banquet Room	Beverages
Sales revenue	$202,000	$108,000	$90,000
Cost of sales	81,000	41,000	28,000
Wages and salaries cost	64,455	34,795	12,000
Other direct costs	18,640	8,960	1,600

The restaurant also has the following indirect, undistributed costs:

Administrative and general expenses	$13,000
Marketing expenses	9,000
Utilities expense	6,000
Property operation and maintenance	12,000
Depreciation expense	14,000
Insurance expense	2,000

a. Prepare a consolidated contributory income statement showing each of the three divisions side by side for comparison. Do not allocate indirect costs.

b. Allocate the indirect costs to the divisions and prepare a departmental income statement for each division. Administrative, general, and marketing costs are allocated based on sales revenue. The remaining indirect costs are allocated based on square footage used by each division: Dining 2,400 sq. ft. Banquet 3,000, sq. ft. Beverage 600 sq. ft.

c. After allocating the indirect costs, would you consider closing any of the divisions? Why or why not?

Reference no: EM131830665

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