Tusk Lid has three divisions: Pulp, Paper and Fibres. Tusk Lid's new management accountant, Shaun Peters, is reviewing the allocation of fixed corporate overhead costs to the three divisions. He is presented with the following information for each division for 2013: File Home Insert Page Layout Formulas Data Review View A B C D 1 Pulp Paper Fibres 2 Revenues $8 500 000 $17 500 000 $24 000 000 3 |Direct manufacturing costs 4 100 000 8 600 000 11 300 000 4 |Division administrative costs 2 000 000 1 800 000 3 200 000 5 |Division margin $2 400 000 $ 7 100 000 $ 9 500 000 6 7 Number of employees 350 250 400 8 Floor space (square metres) 3 251.5 2 229.6 6 131.4 Until now, Tusk Lid has allocated fixed corporate overhead costs to the divisions on the basis of division margins. Shaun asks for a list of costs that comprise fixed corporate overhead and suggests the following new cost-allocation bases: File Home Insert Page Layout Formulas Data Review View Add F G H 1 Fixed corporate overhead costs Suggested allocation bases 2 Human resource management $1 800 000 Number of employees 3 |Organisation 2 700 000 Floor space (square metres) 4 Company administration 4 500 000 Division administrative costs 5 Total $9 000 000 Required 1 Allocate 2013 fixed corporate overhead costs to the three divisions using division margin as the cost-allocation base. What is each division's operating profit margin percentage (division margin minus allocated fixed company overhead costs as a percentage of revenues)? 2 Allocate 2013 fixed costs using the cost-allocation bases suggested by Shaun Peters. What is each division's operating margin percentage under the new cost-allocation scheme? Compare and discuss the results of requirements 1 and 2. If division performance is linked to operating profit margin percentage, which division would be most receptive to the new cost-allocation scheme? Which division would be the least receptive? Explain. Which cost-allocation scheme should Tusk Lid use? Why? How might Shaun Peters overcome any objections that may arise from the divisions