HORNGREN'S COST ACCT >IA<
16th Edition
ISBN: 9780136675464
Author: Datar
Publisher: PEARSON
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Chapter 14, Problem 14.24E
Cost allocation to divisions. Bergen Corporation has three divisions: pulp, paper, and fibers. Bergen’s new controller, David Fisher, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017:
Until now, Bergen Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Fisher asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases:
| Fixed Corporate-Overhead Costs | Suggested Allocation Bases | |
| Human resource management | $ 4,600,000 | Number of employees |
| Facility | 6,400,000 | Floor space (square feet) |
| Corporate administration | 9,200,000 | Division administrative costs |
| Total | $20,200,000 |
- 1. Allocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division’s operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)?
Required
- 2. Allocate 2017 fixed costs using the allocation bases suggested by Fisher. What is each division’s operating margin percentage under the new allocation scheme?
- 3. Compare and discuss the results of requirements 1 and 2. If division performance incentives are based on operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why?
- 4. Which allocation scheme should Bergen Corporation use? Why? How might Fisher overcome any objections that may arise from the divisions?
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Bethany Corporation has three divisions: pulp, paper, and fibers. Bethany's
new controller, Paul Wagner, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017:
Until now, BethanyCorporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Wagner asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases:
Read the requirements3.
Requirement 1. Allocate 2017fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)?
Allocate the fixed corporate-overhead costs, then calculate the division operating margins in dollars and as a percentage of revenue. (Round allocation…
Cost allocation to divisions. Bergen Corporation has three divisions: pulp, paper, and fibers. Bergen’s new controller, David Fisher, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017:
Cost allocation to divisions. Bergen Corporation has three divisions: pulp, paper, and bers. Bergen’s new controller, David Fisher, is reviewing the allocation of xed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017:
Chapter 14 Solutions
HORNGREN'S COST ACCT >IA<
Ch. 14 - Prob. 14.1QCh. 14 - Why is customer-profitability analysis an...Ch. 14 - Prob. 14.3QCh. 14 - A customer-profitability profile highlights those...Ch. 14 - Give examples of three different levels of costs...Ch. 14 - What information does the whale curve provide?Ch. 14 - A company should not allocate all of its corporate...Ch. 14 - What criteria might managers use to guide...Ch. 14 - Once a company allocates corporate costs to...Ch. 14 - A company should not allocate costs that are fixed...
Ch. 14 - How should a company decide on the number of cost...Ch. 14 - Show how managers can gain insight into the causes...Ch. 14 - How can the concept of a composite unit be used to...Ch. 14 - Explain why a favorable sales-quantity variance...Ch. 14 - How can the sales-quantity variance be decomposed...Ch. 14 - Flexible-budget variance, sales-quantity,...Ch. 14 - Sales-volume, sales-mix, and sales-quantity...Ch. 14 - Cost allocation in hospitals, alternative...Ch. 14 - Customer profitability, customer-cost hierarchy....Ch. 14 - Customer profitability, service company. Instant...Ch. 14 - Customer profitability, distribution. Best Drugs...Ch. 14 - Cost allocation and decision making. Reidland...Ch. 14 - Cost allocation to divisions. Rembrandt Hotel ...Ch. 14 - Cost allocation to divisions. Bergen Corporation...Ch. 14 - Prob. 14.25ECh. 14 - Variance analysis, working backward. The Hiro...Ch. 14 - Variance analysis, multiple products. Emcee Inc....Ch. 14 - Market-share and market-size variances...Ch. 14 - Click here to open your MyFinanceLab Study Plan...Ch. 14 - Customer profitability. Bracelet Delights is a new...Ch. 14 - Customer profitability, distribution. Green Paper...Ch. 14 - Customer profitability in a manufacturing firm....Ch. 14 - Customer-cost hierarchy, customer profitability....Ch. 14 - Allocation of corporate costs to divisions. Cathy...Ch. 14 - Cost allocation to divisions. Forber Bakery makes...Ch. 14 - Prob. 14.36PCh. 14 - Cost-hierarchy income statement and allocation of...Ch. 14 - Variance analysis, sales-mix and sales-quantity...Ch. 14 - Market-share and market-size variances...Ch. 14 - Variance analysis, multiple products. The Robins...Ch. 14 - Customer profitability and ethics. KC Corporation...
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