Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company's major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim's board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement. 10 points Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings. Skipped Product Lines Sports Appliances Print Furniture Total Production and sales in units Average selling price per unit Average variable manufacturing cost per unit Average variable selling expense per unit Fixed manufacturing overhead 160,000 $9.00 19.00 20.00 14.00 1.75 160,000 210,000 530,000 References 4.00 3.00 9.60 2.40 excluding depreciation Depreciation of plant and equipment Administrative and selling expense 509,000 424,000 1,180,000 1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic 2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be 3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those areas on the basis of the ratio of the variable costs expended to total variable costs. the ratio of units produced per product line (or per geographical area) to the total number of units produced. expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines, and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation. Manufacturing Staff Furniture Sports Appliances Sales Staff $126,000 United States 146,000 Cnada 86,000 Aia 66,000 106,000 256,000