1. Consider the $1,474,000 in indirect research and development, human resources, and information technology costs shown...

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1. Consider the $1,474,000 in indirect research and development, human resources, and information technology costs shown in Table 2. How should Wayne's team allocate these costs to the three operating departments? What factors should it consider in deciding how to allocate the costs? 2. What specific bases (possibly not from the case) might the team consider to allocate the indirect costs shown in Table 2? How would you allocate the costs? Justify your decision. Table 2: Segment Reporting Disclosure Segment Mechanical Innovation Enterprise Corporate/Other Pre-Allocation Total Profit Before Revenue $6,952,000 Direct Expenses Allocation Profit Margin $4,792,000 $2,160,000 31% 1,265,000 658,000 607,000 48% 623,000 677,000 (54,000) (9%) 68,000 912,000 (844,000) 0 $8,908,000 $7,039,000 $1,869,000 21% Indirect Expenses: Research and Development $559,000 Human Resources 664,000 Information Technology 251,000 Allocable Costs $1,474,000 Company Profit $395,000 4% 1. Consider the $1,474,000 in indirect research and development, human resources, and information technology costs shown in Table 2. How should Wayne's team allocate these costs to the three operating departments? What factors should it consider in deciding how to allocate the costs? 2. What specific bases (possibly not from the case) might the team consider to allocate the indirect costs shown in Table 2? How would you allocate the costs? Justify your decision. Table 2: Segment Reporting Disclosure Segment Mechanical Innovation Enterprise Corporate/Other Pre-Allocation Total Profit Before Revenue $6,952,000 Direct Expenses Allocation Profit Margin $4,792,000 $2,160,000 31% 1,265,000 658,000 607,000 48% 623,000 677,000 (54,000) (9%) 68,000 912,000 (844,000) 0 $8,908,000 $7,039,000 $1,869,000 21% Indirect Expenses: Research and Development $559,000 Human Resources 664,000 Information Technology 251,000 Allocable Costs $1,474,000 Company Profit $395,000 4%