Layton Company Operates a Cafeteria for the Benefit of Its

question 84

Essay

Layton Company operates a cafeteria for the benefit of its employees. The company subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly reduced prices. Budgeted and actual costs in the cafeteria for the year just ended are as follows:
$$\begin{array} { l c c } & \text { Budgeted } & \text { Actual } \\\text { Variable costs } & \$ 500,000 & \$ 436,000 \\\text { Fixed costs } & \$ 340,000 & \$ 352,000\end{array}$$
Costs of the cafeteria are charged to producing departments on the basis of the number of employees in these departments. Fixed costs are charged on the basis of the peak-period number of employees. Data on employees in the company's producing departments follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Machining } & \text { Assembly } & \text { Total } \\\hline \text { Budgeted number of employees } & 300 & 500 & 800 \\\hline \text { Actual number of employees } & 200 & 400 & 600 \\\hline \text { Peak-period number of employees } & 400 & 600 & 1,000 \\\hline\end{array}$$
Required:
a. Compute the dollar amount of variable and fixed costs that should be charged to each of the producing departments at the end of the year for purposes of evaluating performance.
b. Identify the amount, if any, of actual costs that should not be charged to the operating departments.

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Definitions:

Basal Metabolism

The minimum rate of energy expenditure per unit time by endothermic animals at rest, necessary to maintain basic bodily functions.

Aerobic Metabolism

The process of producing cellular energy involving oxygen. It's the way the body turns food into energy through a series of chemical reactions in the presence of oxygen.

Anaerobic Metabolism

A form of metabolism that occurs in the absence of oxygen, allowing cells to produce energy for short bursts of intense activity.

Homeostatic Regulation

The process by which a stable internal environment is maintained within an organism despite changes in external conditions.