P 7-14: Diagnostic Imaging Software Diagnostic Imaging Software (DIS) is the leading producer of imaging software for the health sci- ences. DIS develops, writes, produces, and sells its software through two direct selling organizations: North America and South America. Each of these direct selling forces is evaluated and rewarded as profit centers. The remaining world sales of DIS software are handled through independent distribu- tors in Europe, Asia, and Africa. DIS has a software development group that designs, writes, and debugs the software before turning it over to the direct sales organizations (North and South Amer- ica) and the independent distributors who then sell the software. The cost of designing, writing, and debugging the software is $12 million this year. The following table presents the income statements of the two divisions (millions of $) for this year: North America South America Revenues $17.800 $6.700 Operating expenses* 5.340 3.015 Profit before software development cost $12.460 $3.685 *Does not include any costs of developing, writing, or debugging the software. Senior management of DIS wants to allocate the software costs to the two direct-selling forces in order to evaluate and reward their performance.Required: a. Calculate the profits of the two direct selling organizations (North and South America) after allocating the software costs of $12 million based on the relative revenues of the two organizations. (Round all decimals to 3 significant digits.) b. Calculate the profits of the two direct selling organizations (North and South America) after allocating the software cost of $12 million based on the relative profits before software development cost of the two organizations. (Round all decimals to 3 significant digits.) c. Calculate the profits of the two direct selling organizations (North and South America) after allocating the software cost of $12 million where 75 percent of the cost is assigned to North America and 25 percent to South America. (Round all decimals to 3 significant digits.) d. Discuss the advantages and disadvantages of each of the three allocation methods used in parts (a), (b), and (c) above