Headquaters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc.
| | | |Korea Auto Insurance Co. Inc. | | | |
| | | |For periods 2007 thru 2008 | | | |
|Question 1 - Net Income, revenue, direct, and indirect costs using current method |
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|Question 3 - Net Income, revenue, direct, and indirect costs using cost drivers |
| | |Whole Company | |% of Revenue |Teajon Branch | |% of Revenue |
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|Comparison of Methods |Current Allocation |ABC |
| |2007 |2008 |2007 |2008 |
|Indirect costs |IT |$1,906,234 |$3,541,528 |$1,505,455.69 |$1,832,478.23 |
| |OS |$1,875,154 |$3,526,953 |$1,697,330.10 |$1,487,478.31 |
| |Inv |$1,222,476 |$1,821,773 |$1,368,452.09 |$1,821,773.49 |
| |Mkt |$1,035,996 |$1,850,922 |$1,000,000.00 |$1,270,000.00
| |Net Operating Income |$6,600,000 |$12,600,000 |$15,000,000 |$7,800,000 |$3,000,000 | | | | | | | | |Taxes |($2,244,000) |($4,284,000) |($5,100,000) |($2,652,000) |($1,020,000) | |Net Operating Profit After Taxes |$4,356,000 |$8,316,000 |$9,900,000 |$5,148,000 |$1,980,000 | | | | | | | | |Net Income |$4,356,000 |$8,316,000 |$9,900,000 |$5,148,000 |$1,980,000 | |Year |Units Sold | |Price Per Unit Year 1 - 4 | |1 |70,000 | |$300 | |2 |120,000 | | | | | |3 |140,000 | |Price Per Unit Year Five | |4 |80,000
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