Classify each cost for Pop’s December operations.

What were the implications of the firm’s failure to understand that environment?
December 21, 2020
What is the current issue or challenge the manager is facing?
December 21, 2020

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.