Q. 8 Lenzig Corporation has three divisions: pulp, paper, and fibers. Lenzig's new controller, Ari Bardem, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2012:Until now, Lenzig Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Bardem asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases:Required: (20)1. Allocate 2012 fixed corporate-overhead costs to the three divisions using revenues as the allocation base. What is each division's operating margin?2. Allocate 2012 fixed costs using the allocation bases suggested by Bardem. What is each division'soperating margin under the new allocation scheme?3. If division performance is linked to operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why?

Q. 8 Lenzig Corporation has three divisions: pulp, paper, and fibers, Lenzig's new controller, Ari Bardem, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2012: Pulp Paper Fibers Revenues $8,500,000 $17,500,000 $ 24,000,000 Direct manufacturing costs 4,100,000 8,600,000 1 1,300,000 Division administrative costs 2,000,000 1,800,000 3,200,000 Division margin $ 2,400,000 $ 7, 100,000 $ 9,500,000 Number of employees 400 250 350 Floor space (square feet) 25,000 34,000 51,000 Until now, Lenzig Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Bardem asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases: Fixed Corporate Overhead Costs Suggested Allocation Bases 2 Human resource management $1,900,000 Number of employees 3 Facility 2,600,000 Floor space (square feet) 4 Corporate Administration 4,500,000 Direct manufacturing costs 5 Total $9,000,000 Required: (20) 1. Allocate 2012 fixed corporate-overhead costs to the three divisions using revenues as the allocation base. What is each division's operating margin? 2. Allocate 2012 fixed costs using the allocation bases suggested by Bardem. What is each division's operating margin under the new allocation scheme? 3. If division performance is linked to operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why