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Lilac Group is organized into two geographic divisions (Americas and Rest of the World, or ROW) and a corporate headquarters. Late last year, the
Lilac Group is organized into two geographic divisions (Americas and Rest of the World, or ROW) and a corporate headquarters. Late last year, the Lilac CFO prepared financial operating plans (budgets) for the two divisions for the current year, shown as follows: Revenues Direct division costs Operating profit before allocation Americas $ 60,300,000 48,240,000 $ 12,060,000 ROW $ 73,700,000 51,590,000 $ 22,110,000 Corporate overhead costs are expected to be $10.8 million in the current year. Of the $10.8 million, $6.9 million is fixed, and the remainder is variable, with respect to revenue. Division managers are evaluated and compensated in part on division operating profit relative to the budget. Required: a. Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for the current year after the corporate costs are allocated? fived ual results
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