Leslie Company Operates a Cafeteria for the Benefit of Its

question 26

Essay

Leslie 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: $$\begin{array} { l c c } & \text { Budgeted } & \text { Actual } \\\text { Variable costs*....... } & \$ 500,000 & \$ 436,000 \\\text { Fixed costs.......... } & \$ 340,000 & \$ 352,000\end{array}$$ *Unrecovered cost after deducting amounts received from employees.
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: $\begin{array}{ccc}&\text { Machining } & \text { Assembly } & \text { Total } \\\text { Budgeted number of employees }&300 & 500 & 800 \\\text { Actual number of employees. }&200 & 400 & 600 \\\text { Peak-period number of employees}&400 & 600 & 1,000\end{array}$ 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:

Bailee

A person or entity to whom personal property is delivered for a specified purpose without transfer of ownership.

Transfer Of Possession

The act of moving control or ownership of an asset from one party to another.

Bailee

A Bailee is a person or entity that has temporary possession of someone else's property under a bailment agreement.

Bailor

A bailor is a person or entity that entrusts their property to another (the bailee) under a bailment agreement, where the property is to be returned or otherwise disposed of according to the bailment terms.