America Connect offers Internet, phone, and television services to customers in Wyoming. (Click the icon to view additional information.) The following information is available for the forthcoming period: (Click the icon to view the information.) It has two divisions, an Urban Division catering to urban customers and a Rural Division catering to rural customers. Currently, the company allocates corporate overhead on the basis of revenues of the two divisions. Harvey Leonard, America Connect's president, believes that this method of allocation does not adequately capture the demands that the two divisions put on corporate resources. He proposes developing a cost-hierarchy income statement and also an income statement allocating corporate overhead costs based on the number of service hours used in the two divisions. The Rural Division has a higher number of service hours because service personnel have to travel longer distances to reach customers. In addition to the customer-level costs above, the company expects to incur $2,300,000 of corporate costs. Requirement 1. Prepare a cost-hierarchy income statement for America Connect assuming corporate costs are not allocated to each division. (Use parentheses or a minus sign to enter an operating loss.) Income Statement Component Urban Rural Total \begin{tabular}{|l|l|l|l|} \hline \hline & & & \end{tabular} dollar. Use parentheses or a minus sign to enter an operating loss.) Income Statement Component IncomeStatementComponentUrbanRural the nearest dollar. Use parentheses or a minus sign to enter an operating loss.) Income Statement Component IncomeStatementComponentUrbanRural Requirement 4. What are the advantages and disadvantages of America Connect allocating corporate overhead costs to the two divisions? Advantages of allocating corporate costs: (Select all that apply) performance evaluation, or motivation. C. Managers and salespersons servicing individual customer accounts have complete control over these costs and therefore are motivated by the allocation of these costs to their region. line with their costs. Are the corporate costs supporting better distribution of products to customers? Are the marketing activities increasing the demand for products by customers? variable) costs. Disadvantages of allocating corporate costs: (Select all that apply) costs. performance evaluation, or motivation. measure. However, as the costs of collecting and processing information decrease, companies are more easily able to justify more-complex cost allocations. salesperson benefited from the corporate costs, he or she would have no say in ("would not be responsible for") how much of these costs to use or what they would cost. does not provide the full costs. Requirement 5 . Based on your answers to requirements 1 through 4 , should Leonard close down the Rural Division? Explain. more than the $3,948,000 of customer-level revenue that the Rural Division generates, less the allocated corporate costs of $1,495,000. The allocated costs are relevant and should be subtracted from the revenue. Division is expected to look similar to the past year's costs in the future, America Connect should close down the Rural Division if the division is expected to produce an operating loss