PROBLEM 3 - CUSTOMER PROFITABILITY - 20 points Raymbek Manufacturing has four divisions: AAA, DDD, GGG, and RRR. Corporate headquarters is in Qostanay. Raymbek corporate headquarters incurs costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The following is relevant information about each division: AAA DDD GGG RRR Revenues $ 46,800,000 $ 51,000,000 $37,200,000 $33,000,000 Prime costs $ 31,800,000 $ 24,600,000 $ 25,800,000 $ 27,600,000 Segment Margin $ 15,000,000 $ 26,400,000 $ 11,400,000 $ 5,400,000 # of employees 12,000 24,000 9,000 3,000 Floor space (sq. feet) 23,000 32,000 12,000 7,000 Direct labor hours 42,000 52,000 18,000 16,000 Required: 1. Allocate the indirect headquarters costs of Raymbek Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. 2. Which allocation base do you think the manager of the RRR division would prefer? Explain. 3. What factors would you consider in deciding which allocation base Raymbek should use? 4. Suppose the Raymbek CEO decides to use direct costs as the allocation base. Should the RRR division be closed? Why or why not