Accounting Education Ltd provides tutoring services for students who plan to complete the Association of Chartered Certified Accountants program. Accounting Education Ltd has two operating divisions: one in Gold Coast (Gold Coast Division) and the other one in Sydney (Sydney Division). Accounting Education Ltd currently advertises its services through Google Ads. The fixed advertising cost $180,000 is allocated to divisions using divisional revenues as the base. Accounting Education Ltd pays Google Ads a commission fee based on 15% of the increase in divisional revenues. The divisional data are given as follows: Divisional performance data Gold Coast Sydney Divisional revenues (20X1) Divisional revenues (20X2) Divisional costs (20X2) - all costs are variable Divisional profits before allocation of advertising costs (20X2) SSSS $ 500,000 $ 620,000 $ 600,000 $ 900,000 $ 440,000 $ 697,000 $ 160,000 $ 203,000 Additional data (20X2) Fixed advertising cost (in total) $ 180,000 15.0% Variable advertising cost rate Part B [7 marks] Allocate marketing costs to operating divisions and calculate divisional profits after the cost allocation, using the dual rate method. Part B [10 marks] The accountant provides the following forecasting information for the year 20X3: (1) The forecast shows that 20X3 divisional revenues will be 25% higher than 20X2 divisional revenues for both divisions; (2) Variable advertising rate and fixed advertising costs remain unchanged in 20X3. Required: Prepare a forecasted 20X2 income statement for the both divisions and the company as a whole. Part C [3 marks] What is the key benefit of using a dual rate method to allocate costs with respect to keep-or-drop decisions? Explain briefly. Your Answer