Use the following to answer questions 24-25:

Management of Children Are Precious (CAP), an operator of day-care facilities, wants the firm's profit to be subdivided by center. The firm's accountant has provided the following data:

			Actual	Budgeted
	Actual	Budgeted	Direct	Direct
Center	Revenue	Revenue	Costs	Costs
Downtown	$ 340,200	$ 320,000	$ 300,000	$ 300,000
Irvine	534,600	560,000	440,000	510,000
H Beach	745,200	720,000	740,000	690,000
Totals	$1,620,000	$1,600,000	$1,480,000	$1,500,000

CAP's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $60,000.

24. If advertising expense were allocated to centers based on actual center profitability, how much advertising would be allocated to Irvine?

A. $19,800.

B. $21,000.

C. $30,000.

D. $40,543.

E. Some other amount.

Answer: D

25. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising would be allocated to Irvine?

A. $17,838.

B. $19,800.

C. $20,000.

D. $20,400.

E. $21,000.

Answer: E

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