Eastern Midwest South Total Revenue $4,000,000 $2,600,000 $1,800,000 $8,400,000 Customer-level costs 2,920,000 1,768,000 $ 832,000 32% 1,674,000 6,362,000 $ 126,000 7% $2,038,000 24.26% Customer-level operating income Customer-level operating income percentage $1,080,000 27% In addition to the customer-level costs above, the company also allocates $750,000 of corporate costs to each region based on the revenues of each region. Required 1. Prepare a cost-hierarchy income statement for The Insurance Company using the format in Exhibit 14-7 assuming corporate costs are not allocated to each region. 2. Allocate the corporate costs to each region and calculate the income of each region after assigning corporate costs. 3. Should top management of The Insurance Company close down the South region? Explain. 4. What are the advantages and disadvantages of The Insurance Company allocating corporate costs to the regions?

Eastern Midwest South Total Revenue $4,000,000 $2,600,000 $1,800,000 $8,400,000 Customer-level costs 2,920,000 1,768,000 $ 832,000 32% 1,674,000 6,362,000 $ 126,000 7% $2,038,000 24.26% Customer-level operating income Customer-level operating income percentage $1,080,000 27% In addition to the customer-level costs above, the company also allocates $750,000 of corporate costs to each region based on the revenues of each region. Required 1. Prepare a cost-hierarchy income statement for The Insurance Company using the format in Exhibit 14-7 assuming corporate costs are not allocated to each region. 2. Allocate the corporate costs to each region and calculate the income of each region after assigning corporate costs. 3. Should top management of The Insurance Company close down the South region? Explain. 4. What are the advantages and disadvantages of The Insurance Company allocating corporate costs to the regions?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 3SEQ: Division A of Kern Co. has sales of $350,000, cost of goods sold of $200,000, operating expenses of...

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