BestBest

Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in

MontrealMontreal.

BestBest

corporate headquarters incurs costs of

$ 17 comma 200 comma 000$17,200,000

per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The relevant information about each division is provided.

Best Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Montreal. Best corporate headquarters incurs costs of $17,200,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The relevant information about each division is provided (Click the icon to view the relevant division information.) Required Requirement 1. Allocate the indirect headquarters costs of Best Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. Allocate the indirect headquarters costs of Best Manufacturing to each of the four divisions using the revenues. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Segment margin Acme 7570000 4790200 Dune 13230000 5220200 8009800 Stark 5730000 3801200| Brothers 2 740000 3379800 (639800) Total 84010000 17191400 Less: headquarter costs 2779800 Division operating margin 1928800 66818600 Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the direct costs. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Acme 7570000 Dune 13230000 Stark 5730000 Brothers 2740000 Total 84010000 Segment margin Less: headquarter costs Division operating margin Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the using the segment margin. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Acme 7570000 Dune 13230000 | Stark 5730000| Brothers 2740000 Total 84010000 Segment margin Less: headquarter costs Division operating margin Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the number of employees. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Enter any number in the edit fields and then continue to the next question. Save for later Acme Uune Stark Brothers Total Segment margin 7570000 132300005730000 2740000 84010000 Less: headquarter costs Division operating margin Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the number of employees. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Acme Dune Stark Brothers Total Segment margin Less: headquarter costs Division operating margin Requirement 2. Which allocation base do you think the manager of the Brothers division would prefer? Explain. The Brothers Division manager will prefer to use as the allocation base because it results in the division operating margin. Requirement 3. What factors would you consider Best should use? direct costs All four methods are reasonable options, ject criterion for selecting the allocation base. If larger divisions tend to consume more of headquarters' resources, then using seem to be the best revenues choices. Without compelling reason to change, B enues as the allocation base. Another alternative is to use V as the allocation base on the grounds that this best captures the ability of different divisions to bear corporate segment margin overhead costs. the number of employees Requirement 4. Suppose the Best CEO decides - - ---- base. Should the Brothers division be closed? Why or why not? The Brothers Division be closed because and the division earns a Enter any number in the edit fields and then continue to the next question. Save for Later 1. Allocate the indirect headquarters costs of Best Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. 2. Which allocation base do you think the manager of the Brothers division would prefer? Explain. 3. What factors would you consider in deciding which allocation base Best should use? 4. Suppose the Best CEO decides to use direct costs as the allocation base. Should the Brothers division be closed? Why or why not? Acme Dune Stark Brothers Revenues $ $ $ Direct Costs $ 23,430,000 15,860,000 $ 7,570,000 25,500,000 12,270,000 13,230,000 18,570,000 12,840,000 5,730,000 16,510,000 13,770,000 2,740,000 $ $ $ Segment margin Number of employees 6,175 12,350 4,675 1,575 arger divisions tend to consume more of headquarters' resources, is to use as the allocation base on t Vhy or why direct costs revenues d the divisi segment margin the number of employees en using grounds 1 seem to be the be bear corpo division revenues or direct costs division revenues or the number of employees division revenues or segment margin Best Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Montreal. Best corporate headquarters incurs costs of $17,200,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The relevant information about each division is provided (Click the icon to view the relevant division information.) Required Requirement 1. Allocate the indirect headquarters costs of Best Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. Allocate the indirect headquarters costs of Best Manufacturing to each of the four divisions using the revenues. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Segment margin Acme 7570000 4790200 Dune 13230000 5220200 8009800 Stark 5730000 3801200| Brothers 2 740000 3379800 (639800) Total 84010000 17191400 Less: headquarter costs 2779800 Division operating margin 1928800 66818600 Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the direct costs. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Acme 7570000 Dune 13230000 Stark 5730000 Brothers 2740000 Total 84010000 Segment margin Less: headquarter costs Division operating margin Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the using the segment margin. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Acme 7570000 Dune 13230000 | Stark 5730000| Brothers 2740000 Total 84010000 Segment margin Less: headquarter costs Division operating margin Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the number of employees. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Enter any number in the edit fields and then continue to the next question. Save for later Acme Uune Stark Brothers Total Segment margin 7570000 132300005730000 2740000 84010000 Less: headquarter costs Division operating margin Allocate the indirect headquarters costs of Best Manufacturing to each of four divisions using the number of employees. (Round your answers to the nearest dollar. Round intermediate percentages to two decimal places, X.XX%. Enter negative operating margins with parentheses or a minus sign.) Acme Dune Stark Brothers Total Segment margin Less: headquarter costs Division operating margin Requirement 2. Which allocation base do you think the manager of the Brothers division would prefer? Explain. The Brothers Division manager will prefer to use as the allocation base because it results in the division operating margin. Requirement 3. What factors would you consider Best should use? direct costs All four methods are reasonable options, ject criterion for selecting the allocation base. If larger divisions tend to consume more of headquarters' resources, then using seem to be the best revenues choices. Without compelling reason to change, B enues as the allocation base. Another alternative is to use V as the allocation base on the grounds that this best captures the ability of different divisions to bear corporate segment margin overhead costs. the number of employees Requirement 4. Suppose the Best CEO decides - - ---- base. Should the Brothers division be closed? Why or why not? The Brothers Division be closed because and the division earns a Enter any number in the edit fields and then continue to the next question. Save for Later 1. Allocate the indirect headquarters costs of Best Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. 2. Which allocation base do you think the manager of the Brothers division would prefer? Explain. 3. What factors would you consider in deciding which allocation base Best should use? 4. Suppose the Best CEO decides to use direct costs as the allocation base. Should the Brothers division be closed? Why or why not? Acme Dune Stark Brothers Revenues $ $ $ Direct Costs $ 23,430,000 15,860,000 $ 7,570,000 25,500,000 12,270,000 13,230,000 18,570,000 12,840,000 5,730,000 16,510,000 13,770,000 2,740,000 $ $ $ Segment margin Number of employees 6,175 12,350 4,675 1,575 arger divisions tend to consume more of headquarters' resources, is to use as the allocation base on t Vhy or why direct costs revenues d the divisi segment margin the number of employees en using grounds 1 seem to be the be bear corpo division revenues or direct costs division revenues or the number of employees division revenues or segment margin