Question

Required

Assume that you are the new accounting manager for a 16-screen movie theater (ten of the auditoriums have 150 seats each; the other six auditoriums each have 400 seats). You are to set up a responsibility accounting reporting framework for the theater.

1. Recommend how to segment the different departments of a movie theater for responsibility reporting.

2. Propose an expense allocation system for heat/air conditioning, rent, insurance, and maintenance costs of the theater.

I very need help with insurance. !!!!each student should take a different expense category (heat/air conditioning, rent, insurance, or maintenance), and propose how this expense category should be allocated across (a) the various-sized auditoriums and (b) the concessions operations. For full credit, your proposal should be clear and detailed. ]

Answer 1

Expense should be allocated as follows:-

a) Heat/air Conditioning:- Heat/air conditioning expense should be allocated across in the basis of the concession operations. because air conditioning expense is incurred only when in auditorium movie is running.

b) Rent Expense :- Rent expense should be allocated across in the basis of the various-sized auditoriums because rent is not dependent on whether auditorium is working or not but rent is depend on size of auditorium.

c) Insurance Expense :- Insurance expense should be allocated across in the basis of the various-sized auditoriums because insurance is not dependent on whether auditorium is working or not but insurance is depend on size of auditorium.

d) Maintenance cost of theater :- Maintenance cost of theater should be allocated across in the basis of the concession operations. because when theater is working only then damage is happened only then maintenance cost is required.