Management Accounting

I'd be grateful if someone could show how to approach this management accounting problem. Thanks in advance.

Overhead Apportionment at Timpson Timpson is a UK-based shoe repair and key cutting company, which today is a very large business. It is the UK's leading retail service provider employing over 3,400 colleagues, with 1,325 owned stores and 110 Snappy Snaps franchises throughout the UK and Ireland. Timpson has been established since 1865 and is family owned and run by John Timpson as Chairman and James Timpson as Chief Executive' (Source: Timpson.co.uk). A number of years ago, when Timpson had approximately 200 stores, the company purchased Shoetech - a smaller rival business with 12 outlets. Timpson issued shares to the owners of Shoetech, and the two principal co-owners of Shoetech were given seats on the Timpson Board of Directors. Drawing on his years of experience as CEO, John Timpson wrote a management text entitled Upside Down Management. Related specifically to the Shoetech transaction, he wrote the following: 'The trouble was due to our management accounts. The contribution from 12 Shoetech branches represented 30% of total Timpson profit. 'We're supporting the whole business' said my new directors. The accounts were misleading: as the Shoetech figures carried no overhead we were not comparing like with like.' Required: (a) Briefly explain what you think John Timpson is trying to say in the extract (presented above) from his book, Upside Down Management. (b) How might area and head office overheads be allocated to the shops? Identify THREE possible allocation bases and comment on each. (c) Discuss the usefulness and possible problems associated with allocating central overheads to operating units (such as the individual outlets in this example)