Carbrook Corporation has three divisions: pulp, paper, and fibers. Carbrook's new controller, Leon Weber, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017: (Click the icon to view the data.) Until now, Carbrook Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Weber asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases: |(Click the icon to view the fixed corporate overhead and new allocation bases.) Read the requirements. Requirement 1. Allocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)? Allocate the fixed corporate-overhead costs, then calculate the division operating margins in dollars and as a percentage of revenue. (Round allocation proportions to one decimal place, X.X%, and dollar amounts to the nearest dollar. Enter operating margin percentages to one decimal, X.X%.) Fibers Division margin $ Pulp 2,500,000 1,237,500 $ Paper 7,200,000 3,564,000 $ 10,300,000 5,098,500 Allocated fixed corporate-overhead $ 1,262,500 $ 3,636,000 $ 5,201,500 Operating margin Operating margin % 14.5 % 22.2 % 19.1 % Requirement 2. Allocate 2017 fixed costs using the allocation bases suggested by Weber. What is each division's operating margin percentage under the new allocation scheme? Allocate the fixed corporate-overhead costs, then calculate the division operating margins in dollars and as a percentage of revenue. (Round allocation proportions to one decimal place, X.X%, and dollar amounts to the nearest dollar. Round the operating margin percentages to one decimal, X.X%. Use parentheses or a minus sign for negative amounts.) Pulp Fibers Paper 7,200,000 $ 2,500,000 $ $ 10,300,000 Division margin Allocated fixed corporate-overhead costs: Human resource management Facility Corporate administration Operating margin Operating margin % % % % - Requirements e? alf 1. Allocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)? 2. Allocate 2017 fixed costs using the allocation bases suggested by Weber. What is each division's operating margin percentage under the new allocation scheme? 3. Compare and discuss the results of requirements 1 and 2. If division performance incentives are based on operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why? 4. Which allocation scheme should Carbrook Corporation use? Why? How might Weber overcome any objections that may arise from the divisions? Print Done - - - Data table Data table Paper Fibers Pulp 8,700,000 $ Revenues $ 16,400,000 $ 27,200,000 Fixed Corporate-Overhead Costs Human resource management $ Facility Corporate administration $ Total Suggested Allocation Bases 1,500,000 Number of employees 3,500,000 Floor space (square feet) 4,900,000 Division administrative costs 9,900,000 Direct manufacturing costs Division administrative costs 3,200,000 3,000,000 8,000,000 1,200,000 11,100,000 5,800,000 $ 2,500,000 $ 7,200,000 $ 10,300,000 Division margin Number of employees Floor space (square feet) $ 220 $ 165 $ 715 $ 26,400 $ 20,680 $ 62,920 Print Done Print Done Human resource management Facility