Allocation ofcentral corporate costs to divisions. Legarde has four geographically dispersed divisions:

Book Publishing Broadcasting Print Media Multimedia Under the current allocation system, costs incurred at Legarde corporate headquarters are col¬

lected in a single pool and allocated to each division on the basis of its revenues. The central corporate costs for 2007 are

$ 11,000,000 150,000,000 50,000,000 100,000,000 200,000,000

$511,000,000

$ummary data (in millions of dollars) related to the divisions for 2007 are Interest on debt Human resource management Corporate administration Research and development Advertising 590 Book Multimedia Broadcasting Print Media Publishing Revenues $1,400 $4,500 $2,500 $1,600 Direct costs 750 3,500 2,000 1,000 Segment margin $_ 650 $1,000 $ 500 $ 600 The following information on the four divisions is also available:

Multimedia Book Broadcasting Print Media Publishing Floor space

(square metres) 40,000 160,000 200,000 100,000 Number of employees Divisional 1,000 3,000 2,500 1,500 administrative costs

(in millions of dollars) $150 $400 $250 $200 A review of the central corporate costs for divisions reveals the following:

Out ofthe total $11 million interest on debt, $6.5 million is for the debt to purchase a building for the Broadcasting division. The remaining $4.5-million interest cost is on the borrowings for the purchase of equipment for the Multimedia division.

No research and development work is done for the Print Media division. The director of research and development estimates that 40% of the work in her responsibility area is done for the Multimedia division, and the remaining 60% is done equally for the Broadcasting and Book Publishing divisions.

Advertising campaigns sponsored at the central corporate level are to boost the overall corporate image. It is assumed that the benefits to the divisions are in proportion to their revenues.

The resources expended by human resource management on recruiting, training, and so forth for the divisions are approximately in proportion to the number of employees.

To support divisional managers, the corporate management works very closely with them.

The divisional administrative costs are a good indicator of die relative size of each divi¬

sion’s management team.

Allocate the central corporate costs to divisions that are consistent with cause-and-effect or benefits-received criteria.