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.
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.
