Exercise 14-24 (Algo) Compute Divisional Income (LO 14-1)

Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales).

The following information is from Lauderdale's first year of operations:

	Region I	Region II	Region III	Total Corporation
Revenues	$ 1,205,000	$ 1,655,000	$ 2,255,000	$ 5,115,000
Cost of sales	452,500	812,500	1,142,500	2,407,500
Selling, General and Administrative (all fixed)	427,500	637,500	857,500	1,922,500
Corporate overhead				442,000

Required:

Compute divisional operating income for the three regions. Ignore taxes.

How have these regions performed?