Allocation of corporate costs to divisions. Cathy Carpenter, controller of the Sweet and Salty Snacks is preparing a presentation to senior executives about the performance of its four divisions. Summary data related to the four divisions for the most recent year are as follows: Home Insert Page Layout Formulas Data Review View A в DIVISIONS Nuts 1. Candy Crackers Cookies Total 3 Revenues 4 Operating Costs 5 Operating Income $ 870,000 $ 975,000 | $ 654,000 |$ 501,000 $ 3,000,000 330,800 378,000 658,000 314,000 1,680,800 $ 539,200 $ 597,000 $ (4,000)$ 187,000 $ 1,319,200 7 Identifiable assets 8 Number of employees $1,800,000 $ 2,880,000 $1,440,000 $1,080,000 $7,200,000 2,700 3,600 6,600 2,100 15,000 Under the existing accounting system, costs incurred at corporate headquarters are collected in a single cost pool ($1.2 million in the most recent year) and allocated to each division on the basis of its actual rev- enues. The top managers in each division share in a division-income bonus pool. Division income is defined as operating income less allocated corporate costs. Carpenter has analyzed the components of corporate costs and proposes that corporate costs be col- lected in four cost pools. The components of corporate costs for the most recent year and Carpenter's sug- gested cost pools and allocation bases are as follows: Home Insert Page Layout Formulas Data Review View Suggested Cost Pool Suggested Allocation Base 11 Corporate Cost Category Amount 12 Interest on debt 13 Corporate salaries 14 Accounting and control 15 General marketing 16 Public affairs 17 Personnel and payroll 18 Total $380,000 Cost Pool 1 200,000 Cost Pool 2 160,000 Identifiable assets Pool 2 170,000 Cost Pool 2 150,000 Cost Pool 3 140,000 Cost Pool 4 $1,200,000 Division revenues Positive operating income* Number of employees 19 20 "Carpenter proposes that this cost be allocated using the operating income (if positive) of divisions, 21 with only divisions with positive operating income included in the allocation base.

Allocation of corporate costs to divisions. Cathy Carpenter, controller of the Sweet and Salty Snacks is preparing a presentation to senior executives about the performance of its four divisions. Summary data related to the four divisions for the most recent year are as follows: Home Insert Page Layout Formulas Data Review View A в DIVISIONS Nuts 1. Candy Crackers Cookies Total 3 Revenues 4 Operating Costs 5 Operating Income $ 870,000 $ 975,000 | $ 654,000 |$ 501,000 $ 3,000,000 330,800 378,000 658,000 314,000 1,680,800 $ 539,200 $ 597,000 $ (4,000)$ 187,000 $ 1,319,200 7 Identifiable assets 8 Number of employees $1,800,000 $ 2,880,000 $1,440,000 $1,080,000 $7,200,000 2,700 3,600 6,600 2,100 15,000 Under the existing accounting system, costs incurred at corporate headquarters are collected in a single cost pool ($1.2 million in the most recent year) and allocated to each division on the basis of its actual rev- enues. The top managers in each division share in a division-income bonus pool. Division income is defined as operating income less allocated corporate costs. Carpenter has analyzed the components of corporate costs and proposes that corporate costs be col- lected in four cost pools. The components of corporate costs for the most recent year and Carpenter's sug- gested cost pools and allocation bases are as follows: Home Insert Page Layout Formulas Data Review View Suggested Cost Pool Suggested Allocation Base 11 Corporate Cost Category Amount 12 Interest on debt 13 Corporate salaries 14 Accounting and control 15 General marketing 16 Public affairs 17 Personnel and payroll 18 Total $380,000 Cost Pool 1 200,000 Cost Pool 2 160,000 Identifiable assets Pool 2 170,000 Cost Pool 2 150,000 Cost Pool 3 140,000 Cost Pool 4 $1,200,000 Division revenues Positive operating income* Number of employees 19 20 "Carpenter proposes that this cost be allocated using the operating income (if positive) of divisions, 21 with only divisions with positive operating income included in the allocation base.

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Question

Discuss two reasons why Sweet and Salty Snacks should allocate corporate costs to each division

Allocation of corporate costs to divisions. Cathy Carpenter, controller of the Sweet and Salty
Snacks is preparing a presentation to senior executives about the performance of its four divisions.
Summary data related to the four divisions for the most recent year are as follows:
Home
Insert
Page Layout
Formulas
Data
Review
View
A
в
DIVISIONS
Nuts
1.
Candy
Crackers
Cookies
Total
3 Revenues
4 Operating Costs
5 Operating Income
$ 870,000 $ 975,000 | $ 654,000 |$ 501,000 $ 3,000,000
330,800
378,000
658,000
314,000
1,680,800
$ 539,200 $ 597,000 $ (4,000)$ 187,000 $ 1,319,200
7 Identifiable assets
8 Number of employees
$1,800,000 $ 2,880,000 $1,440,000 $1,080,000 $7,200,000
2,700
3,600
6,600
2,100
15,000
Under the existing accounting system, costs incurred at corporate headquarters are collected in a single
cost pool ($1.2 million in the most recent year) and allocated to each division on the basis of its actual rev-
enues. The top managers in each division share in a division-income bonus pool. Division income is defined
as operating income less allocated corporate costs.

Carpenter has analyzed the components of corporate costs and proposes that corporate costs be col-
lected in four cost pools. The components of corporate costs for the most recent year and Carpenter's sug-
gested cost pools and allocation bases are as follows:
Home
Insert
Page Layout
Formulas
Data
Review
View
Suggested
Cost Pool Suggested Allocation Base
11 Corporate Cost Category Amount
12 Interest on debt
13 Corporate salaries
14 Accounting and control
15 General marketing
16 Public affairs
17 Personnel and payroll
18 Total
$380,000 Cost Pool 1
200,000 Cost Pool 2
160,000
Identifiable assets
Pool 2
170,000 Cost Pool 2
150,000 Cost Pool 3
140,000 Cost Pool 4
$1,200,000
Division revenues
Positive operating income*
Number of employees
19
20 "Carpenter proposes that this cost be allocated using the operating income (if positive) of divisions,
21 with only divisions with positive operating income included in the allocation base.

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