Stable Enterprises is organized into two geographic divisions (Asia and Europe) and a corporate headquarters. Late in year 7, the Stable Finance Department prepared financial operating plans (budgets) for the two divisions, shown as follows (in thousands of dollars).

	Asia			Europe
Revenues	$	81,400		$	103,600
Direct division costs		40,700			62,160
Operating profit before allocation	$	40,700		$	41,440

Corporate overhead costs (in thousands of dollars) are expected to be $51,000 in year 8. Of the $51,000, $32,500 is fixed and $18,500 is variable, with respect to revenue. Division managers are evaluated and compensated in part on division operating profit relative to the budget.

Required:

a. Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for year 8 after the corporate costs are allocated?

b. At the end of year 8, actual corporate costs incurred (in thousands of dollars) were $26,000. Of the $26,000, $14,000 was fixed. Actual results (in thousands of dollars) in the two divisions are as follows.

	Asia			Europe
Revenues	$	81,400		$	103,600
Direct costs		40,700			62,160
Operating profit before allocation	$	40,700		$	41,440

What are the operating profits in each division for year 8 after the corporate costs are allocated?

• Required A

Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for year 8 after the corporate costs are allocated? (Do not round intermediate calculations.)

	Asia	Europe	Total
Revenues
Direct costs
Operating profit before allocations	$0	$0	$0
Corporate costs
Operating profit	$0	$0	$0

• Required B

What are the operating profits in each division for year 8 after the corporate costs are allocated? (Do not round intermediate calculations.)

	Asia	Europe	Total
Revenues
Direct costs
Operating profit before allocations	$0	$0	$0
Corporate costs
Operating profit	$0	$0	$0