E15-24 (book/static) Question Help Holbrook Corporation has three divisions: pulp, paper, and fibers. Holbrook's new controller, Paul Mayer, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2020 (Click the icon to view the data.) Until now, Holbrook Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Mayer asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases E: (Click the icon to view the fixed corporate overhead and new allocation bases.) Read the requirements Requirement 1. Allocate 2020 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%.) Pulp Paper Fibers Division margin $ 2.300,000 $ 7,200,000 $ 10,500,000 Allocated fixed corporate-overhead Operating margin Operating margin % % % % i Data Table - Fibers Revenues $ Pulp 8,800,000 $ 3,500,000 3,000,000 Paper 16,600,000 $ 8,200,000 1,200,000 26,800,000 10,500,000 5,800,000 Direct manufacturing costs Division administrative costs Division margin Number of employees Floor space (square feet) $ 2,300,000 $ 7,200,000 $ 10,500,000 160 120 520 28,800 22,440 68,760 $ Fixed Corporate-Overhead Costs Human resource management Facility Corporate administration Suggested Allocation Bases 2,100,000 Number of employees 3,600,000 Floor space (square feet) 4,600,000 Division administrative costs 10,300,000 $ Total i - Requirements 1. Allocate 2020 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 2020 fixed costs using the allocation bases suggested by Mayer. 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 Holbrook Corporation use? Why? How might Mayer overcome any objections that may arise from the divisions