to Sales uses different media to advertise its products$($television$,$ radio,$$ newspaper, Internet, and so$$ on$).$ At the end of $2019,$ the company$$ president, Jim McKinnley$,$ decided that corporate headquarters would negotiate and pay for all advertising costs and allocate these costs to each of the$$ company's four sales locations based on number of vehicles sold.

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Part $1$

If managers had done the same advertising on their$$ own, their advertising costs and the actual number of cars sold would be as$$ follows:

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Part $1$

Requirement $1.$ Show the amount of the $2020$ advertising cost $($$ $1$ comma $600$ comma $000)$ that would be allocated to each of the divisions under the following$$ criteria: $($a$)$ McKinnley's allocation method based on actual number of cars$$ sold, $($b$)$ the$$ stand$-$alone method based on the amounts divisions would have spent on their own$$ advertising, $($c$)$ the$$ incremental$-$allocation method, with divisions ranked on the basis of dollars they would have spent on advertising in $2020.($Do not round intermediary calculations. Round the final answer to the nearest whole dollar. Enter a$"0"$ for amount with a zero$$ values.$)$

$($a$.)$

$($b$.)$

$($c$.)$

Sales Location

Cost Allocated

Cost Allocated

Cost Allocated

East

West

North

South

Part $2$

Requirement $2.$ Which method do you think is most equitable to the divisional sales$$ managers? What other options might President Jim McKinnley have for allocating the advertising$$ costs?

In this$$ situation,

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McKinnley's allocation method based on number of cars sold

the incremental method

the stand$-$alone method

is probably the best method because

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it allocates the highest amount of advertising cost to the division with the highest car sales

the weights it uses for allocation are based on the number of cars sold in each location

the weights it uses for allocation are based on the individual advertising cost for each location

$.$ Therefore,$$

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each entity gets a proportion of advertising costs relative to car sales

each entity gets the same relative proportion of advertising costs as their actual spending

the entities with the highest spending will be allocated those costs

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Part $3$

What other$$ option$($s$)$ might President Jim McKinnley have for allocating the advertising$$ costs?

A$.$

McKinnley could allocate the advertising cost equally among the divisions.

B$.$

McKinnley could alternately separate the total $ $1$ comma $600$ comma $000$ of advertising cost into two cost$$ pools: one for new car advertising and one for used car advertising and allocate on the basis of new cars sold and used cars sold.

C$.$

McKinnley could avoid allocating the advertising costs and absorb the costs through the company headquarters.

D$.$

All of the above are equitable alternatives.

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