Evaluating Decision Alternatives Involving Overhead Jm Shoe, chief executive officer of Jolsen International, a multinational textile conglomerate, has recently been evaluating the profitability of one of the company's subsidianes, Pride Fashions, Inc, located in Rochester, New York The Rochester facility consists of a dress division and a casual wear division. Danelle's Dresses produces women's fine apparel, while the other division, Tesoro's Casuals, produces comfortable cotton casual clothing Jolsen's chief financial officer, Pete Moss, has recommended that the casual wear division be closed. The year-end financials Shoe junt received show that Tesoro's Casuals has been operating at a loss for the past year, while Daneite's Dresses continues to show a respectable profit Shoe in puzzled by this fact because he considers both managers to be very capable The Rochester site consists of a 140,000-square foot building where Tesoro's Casuals and Daneille's Dresses utilize 70 percent and 30 percent of the floor space, respectively Fred overhead costs comit of the annual lease payment, fire insurance, security, and the common costs of the purchaung department's staff Fixed overhead is allocated based on percentage of floor space Housing both divisions in this facility seemed like an ideal situation to Shoe because both divisions purchase from many of the same suppliers and have the potential to combine materials ondering to take advantage of quantity discounts Furthennar each division is serviced by the same maintenance department. However, the two managers have been plagued by an inability to cooperate due to disagreements over the selection of suppliers as well as the quantities to purchase from common suppliers. This is of serious concern to Shoe as he turns his attention to the report in front of him Sales revenue Expenses Direct materials Direct labor Selling expenses (all variable) Overhead expenses Flead overhead Variable verhead Net income before taxes Required: Tesoro's Daneille's Casuals Dresses (5000x) (1000) $500 $1,000 $(200) 5 (465) (70) (130) (100) (200) (42) (40) (45) $ (8) $ 110 Evaluate Pete Moss's recoinmendation to dose Tesoro's Casua b. Should the overhead costs be allocated based on floor space or some other measure? Justify your answer Evaluating Decision Alternatives Involving Overhead Jim Shoe, chief executive officer of Jolsen International, a multinational textile conglomerate, has recently been evaluating the profitability of one of the company's subsidiaries, Pride Fashions, Inc, located in Rochester, New York The Rochester facility consists of a dress division and a casual wear division Danelle's Dresses produces women's fine apparel, while the other division, Tesoro's Casuals, produces comfortable cotton casual clothing Jolsen's chief financial officer, Pete Moss, has recommended that the casual wear division be closed. The year-end financials Shoe just received show that Tesoro's Casuals has been operating at a loss for the past year, while Daneille's Dresses continues to show a respectable profit Shoe is puzzled by this fact because he considers both managers to be very capable The Rochester site consists of a 140,000-square foot building where Tesoro's Casuals and Daneille's Dresses utilize 70 percent and 30 percent of the floor space, respectively Fixed overhead costs consist of the annual lease payment, fire insurance, security, and the common costs of the purchasing department's staff Fued overhead is allocated based on percentage of floor space Housing both divisions in this facility seemed like an ideal situation to Shoe because both divisions purchase from many of the same suppliers and have the potential to combine materials ordering to take advantage of quantity discounts. Furthermore each division is serviced by the same maintenance department. However, the two managers have been plagued by an inability to cooperate due to disagreements over the selection of suppliers as well as the quantities to purchase from common suppliers. This is of serious concern to Shoe as he turns his attention to the report in front of him Tesoro's Daneille's Casuals Dresses Sales revenue Expenses: Direct materials Direct labor Selling expenses (all variable) Overhead expenses Fixed overhead Variable overhead Net income before taves Required (5000) (5000) $ 500 $1,000 $(200) $ (465) (70) (130) (100) (200) (98) (42) (40) (45) $ (8) $118 a Evaluate Pete Moss's recommendation to close Tesoro's Casuah b. Should the overhead costs be allocated based on floor space or some other measure? Justify your answer Evaluating Decision Alternatives involving Overhead Jm Shoe, chief executive officer of Jolsen International, a multinational textile conglomerate, has recently been evaluating the prostability of one of the company's subsidiaries, Pride Fashions, Inc. located in Rochester, New York The Rochester facility consists of a dress division and a casual wear division Daneille's Dresses produces women's fine apparel, while the other division, Tesoro's Casuals, produces comfortable cotton casual clothing Jolsen's chief financial officer. Pete Moss, has recommended that the casual wear division be closed. The year-end financials Shoe just received show that Tesoro's Casuais has been operating at a loss for the past year, while Daneille's Dresses continues to show a respectable profit. Shoe is puzzled by this fact because be considers both managers to be very capable The Rochester site consists of a 140,000-square-foot building where Tesoro's Casuals and Danelle's Dresses utaze 70 percent and 30 percent of the floor space, respectively. Fixed overhead costs consist of the annual lease payment, fire insurance, security, and the common costs of the purchasing department's staff. Fixed overhead is allocated based on percentage of floor space Housing both divisions in this facility seemed like an ideal situation to Shoe because both divisions purchase from many of the same suppliers and have the potential to combine materials ordering to take advantage of quantity discounts Furthermore, each division is serviced by the same maintenance department. However, the two managers have been plagued by an inability to cooperate due to disagreements over the selection of suppliers as well as the quantities to purchase from common suppliers This is of serious concem to Shoe as he turns his attention to the report in front of him