Question
Blue Devil Contracting has two divisions. They are located in Detroit, Michigan and Austin, Texas respectively. A summary of their 2021 operations are as
Blue Devil Contracting has two divisions. They are located in Detroit, Michigan and Austin, Texas respectively. A summary of their 2021 operations are as follows: Detroit Revenue $52,800,000 Construction costs $48,576,000 Division fixed overhead costs $ 2,640,000 Austin $36,500,000 $32,120,000 $ 1,825,000 Corporate fixed overhead, not directly allocable to either division, was $2,200,000. For 2022, fixed overhead is expected to increase by 5% for each division, the corporate overhead is expected to remain constant. The Contribution Margin Ratio for each division is expected to remain unchanged. Company management has set a goal of increasing the company's net income by 10% for 2022. The Detroit division has been tasked with contributing at least 65% of the 2022 income. Management has asked you to: 1. Determine the 2021 income for each division and the company overall. 2. Determine the minimum revenue that each division must generate to meet the targeted income for 2022. Prepare a 2022 income statement to check your figures. Blue Devil Contracting has two divisions. They are located in Detroit, Michigan and Austin, Texas respectively. A summary of their 2021 operations are as follows: Detroit Revenue $52,800,000 Construction costs $48,576,000 Division fixed overhead costs $ 2,640,000 Austin $36,500,000 $32,120,000 $ 1,825,000 Corporate fixed overhead, not directly allocable to either division, was $2,200,000. For 2022, fixed overhead is expected to increase by 5% for each division, the corporate overhead is expected to remain constant. The Contribution Margin Ratio for each division is expected to remain unchanged. Company management has set a goal of increasing the company's net income by 10% for 2022. The Detroit division has been tasked with contributing at least 65% of the 2022 income. Management has asked you to: 1. Determine the 2021 income for each division and the company overall. 2. Determine the minimum revenue that each division must generate to meet the targeted income for 2022. Prepare a 2022 income statement to check your figures.
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