Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Loretto Outfitters is a retail chain of stores organized into two divisions ( East and West ) and a corporate headquarters. Corporate planners have prepared
Loretto Outfitters is a retail chain of stores organized into two divisions East and West and a corporate headquarters. Corporate planners have prepared financial operating plans budgets for the two divisions for the upcoming year year Selected information from the plans is as follows:
East West
Number of stores
Revenues $ $ $
Direct costs $
Division margin $ $ $
Based on information from various corporate staff, the planning team estimates that corporate overhead costs are expected to be $ million in year Of the $ million, $ million is fixed and the remainder is variable. With respect to the variable overhead, $ million is variable with respect to revenue and the remainder is variable with respect to the number of stores. The two division managers are evaluated and compensated in part on division operating profit including any allocated corporate costs relative to the budget. Corporate overhead at Loretto is allocated based on relative revenues to determine both budgeted and actual operating profit.
Required:
b At the end of year actual corporate costs incurred were $ million. Of the $ million, $ million was fixed, $ million was variable with respect to revenues, and $ million was variable with respect to the number of stores. Actual division results in year prior to any allocation, are as follows:
East West
Number of stores
Revenues $ $ $
Direct costs $
Division margin $ $ $
What are the actual reported operating profits in each division for year after the corporate costs are allocated?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started