Francisco Bakery makes baked goods for grocery stores and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurs costs that are indirect costs for the divisions. (Click to view information for each division and the main headquarters.) Read the requirements. Requirement 1. Allocate the indirect costs of Francisco to each division equally. Calculate division operating income after allocation of headquarter costs. (Enter operating losses with minus signs or parentheses.) Segment margin Allocated headquarter costs Operating income (loss) Data table Bread Cake Doughnuts 7,200,000 $ 1,400,000 $ 5,950,000 Costs incurred in the main headquarters are as follows: Human resources (HR) costs Accounting department costs Rent and depreciation $ 1,700,000 1,300,000 1,440,000 - Requirements Other Total costs 510,000 $ 4,950,000 The Francisco upper management currently allocates this cost to the divisions equally. One of the division managers has done some research on activity-based costing and proposes the use of different allocation bases for the different indirect costs - number of employees for HR costs, total revenues for accounting department costs, square feet of space for rent and depreciation costs, and equal allocation among the divisions of "other" costs. Information about the three divisions follows: 1. Allocate the indirect costs of Francisco to each division equally. Calculate division operating income after allocation of headquarter costs. 2. Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. Comment on the allocation bases used to allocate headquarter costs. 3. Which division manager do you think suggested this new allocation? Explain briefly. Which allocation do you think is "better"? Bread Cake Doughnuts Total revenues $ Direct costs 21,300,000 $ 4,300,000 $ 14,100,000 2,900,000 13,500,000 7,550,000 $ 7,200,000 $1,400,000 $ 5,950,000 Segment margin Number of employees Square feet of space 600 18,000 150 250 3,000 9,000 Print Done - X