E14.5 (LO 2), AP Excel Marcus is the operating manager of You Move Me, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Marcus has the opportunity to test all of these products for quality-control purposes. At the end of the year, Marcus needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively. Four-Wheelers Personal Watercraft Snowmobiles Sales $1,125,000 $1,410,000 $2,000,000 Payroll Maintenance IT Four-Wheelers Watercraft Snowmobiles Costs $94,000 $115,000 $250,000 $850,000 $1,145,000 $1,750,000 Number of employees Maintenance hours IT hours 2 3 4 20 18 27 100 200 150 1,800 750 1,300 150 40 220 800 1,250 900 Required a. Use Excel to allocate the three support department costs to the three product lines using the reciprocal method. b. Determine operating income amounts and profit margin percentages for each product line after accounting for the allocated support costs. c. Assuming competitor profit margins in the snowmobile market are in the range of 6-10%, does it seem like Marcus is correct that his company could consider charging a higher price for its snowmobiles? Explain what additional factors would need to be considered before You Move Me raises its prices for these products. Allocate common costs between two departments using the stand-alone and incremental methods. E14.6 (LO 3), AP Elliot's business is booming! Plans are in place to expand the existing facility. But in the meantime, both of the key operating divisions needed storage space for their raw materials. Operating Unit Thumbdrive (OUT) needs 2,000 square feet of space, and Operating Unit Racket (OUR) needs 3,000 square feet of space. OUT's manager got a bid of $500/month for storage space, while OUR's manager received a bid of $1,000/month for storage space. Elliot believes it would be prudent to find space that would fit both of the operating units' needs. The cost of that space- which allows additional room for each unit would be $1,350/month. He goes ahead and rents this space for 6 months.