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Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurs costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The following is relevant information about each division: Acme Dune Stark Brothers $16,500,000 13,800,000 $ 2,700,000 1,500 Revenues $23,400,000 $25,500,000 $18,600,000 12,300,000 $13,200,000 12,000 Direct costs Segment margin Number of employees 15,900,000 $ 7,500,000 6,000 12,900,000 $ 5,700,000 4,500

Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurs costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The following is relevant information about each division: Acme Dune Stark Brothers $16,500,000 13,800,000 $ 2,700,000 1,500 Revenues $23,400,000 $25,500,000 $18,600,000 12,300,000 $13,200,000 12,000 Direct costs Segment margin Number of employees 15,900,000 $ 7,500,000 6,000 12,900,000 $ 5,700,000 4,500

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 7E: Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments,...
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Allocate the indirect headquarters costs of Reidland Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs.

Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurs costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The following is relevant information about each division: Acme Dune Stark Brothers $16,500,000 13,800,000 $ 2,700,000 1,500 Revenues $23,400,000 $25,500,000 $18,600,000 12,300,000 $13,200,000 12,000 Direct costs Segment margin Number of employees 15,900,000 $ 7,500,000 6,000 12,900,000 $ 5,700,000 4,500
Transcribed Image Text:Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurs costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The following is relevant information about each division: Acme Dune Stark Brothers $16,500,000 13,800,000 $ 2,700,000 1,500 Revenues $23,400,000 $25,500,000 $18,600,000 12,300,000 $13,200,000 12,000 Direct costs Segment margin Number of employees 15,900,000 $ 7,500,000 6,000 12,900,000 $ 5,700,000 4,500
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