Costs incurred in the main headquarters are as follows: Human resources (HR) costs$2,300,000Accounting department costs1,800,000Rent and depreciation640,000Other660,000Total costs$5,400,000TheFordupper management currently allocates this cost to the divisions equally. One of the division managers has done some research on activity-based costing and proposes the use of different allocation bases for the different indirectcosts−numberof employees for HR costs, total revenues for accounting department costs, square feet of space for rent and depreciation costs, and equal allocation among the divisions of "other" costs. Information about the three divisions follows: BreadCakeDoughnutsTotal revenues$21,200,000$4,700,000$13,200,000Direct costs14,000,0003,300,0007,000,000Segment margin$7,200,000$1,400,000$6,200,000Number of employees700200100Square feet of space8,0002,0006,0001.Allocate the indirect costs ofFordto each division equally. Calculate division operating income after allocation of headquarter costs.2.Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. Comment on the allocation bases used to allocate headquarter costs.3.Which division manager do you think suggested this new allocation? Explain briefly. Which allocation do you think is "better"? Ford Bakery makes baked goods for grocery stores, and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurscosts that are indirect costs for the divisions.E (Click to view information for each division and the main headquarters.)Read the requirements......Requirement 1. Allocate the indirect costs of Ford to each division equally. Calculate division operating income after allocation of headquarter costs. (Enter operating losses with minus signsor parentheses.)BreadCakeDoughnutsSegment margin$7,200,000 $1,400,000 $6,200,000Allocated headquarter costs1,800,0001,800,0001,800,000$5,400,000 $(400,000) $4,400,000Operating income (loss)Requirement 2. Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. (Round allocationproportions to three decimal places. Enter operating losses with minus signs or parentheses.)BreadCakeDoughnutsSegment margin$7,200,000 $1,400,000 $6,200,000Allocated headquarter costs:Human resources1,610,000460,000230,000Accounting department975959216368607673Rent and depreciation320,00080,000240,000180000180000180000Other46363249423274114041Operating income (loss)

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Description: Costs incurred in the main headquarters are as follows: Human resources (HR) costs$2,300,000Accounting department costs1,800,000Rent and depreciation640,000Other660,000Total costs$5,400,000TheFordupper management currently allocates this cost to the

Accounting department costs shall be allocated basis of the total revenues and other costs shall be…

Ford Bakery makes baked goods for grocery stores, and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurs costs that are indirect costs for the divisions. E (Click to view information for each division and the main headquarters.) Read the requirements. Requirement 1. Allocate the indirect costs of Ford to each division equally. Calculate division operating income after allocation of headquarter costs. (Enter operating losses with minus signs or parentheses.) Bread Cake Doughnuts Segment margin 2$ 7,200,000 $ 1,400,000 $ 6,200,000 Allocated headquarter costs 1,800,000 1,800,000 1,800,000 2$ 5.400.000 $ (400,000) $ 4,400,000 Operating income (loss) Requirement 2. Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. (Round allocation proportions to three decimal places. Enter operating losses with minus signs or parentheses.) Bread Cake Doughnuts Segment margin $ 7,200,000 $ 1,400,000 $ 6,200,000 Allocated headquarter costs: Human resources 1,610,000 460,000 230,000 Accounting department 975959 216368 607673 Rent and depreciation 320.000 80,000 240,000 180000 180000 180000 Other 463632 4942327 Operating income (loss) 4114041

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 8E: Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division...

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Costs incurred in the main headquarters are as follows:

Human resources (HR) costs	$2,300,000
Accounting department costs	1,800,000
Rent and depreciation	640,000
Other	660,000
Total costs	$5,400,000

The

Ford

upper management currently allocates this cost to the divisions equally. One of the division managers has done some research on activity-based costing and proposes the use of different allocation bases for the different indirect

costs−number

of employees for HR costs, total revenues for accounting department costs, square feet of space for rent and depreciation costs, and equal allocation among the divisions of "other" costs. Information about the three divisions follows:

	Bread	Cake	Doughnuts
Total revenues	$21,200,000	$4,700,000	$13,200,000
Direct costs	14,000,000	3,300,000	7,000,000
Segment margin	$7,200,000	$1,400,000	$6,200,000
Number of employees	700	200	100
Square feet of space	8,000	2,000	6,000

1.	Allocate the indirect costs of Ford to each division equally. Calculate division operating income after allocation of headquarter costs.
2.	Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. Comment on the allocation bases used to allocate headquarter costs.
3.	Which division manager do you think suggested this new allocation? Explain briefly. Which allocation do you think is "better"?

Ford Bakery makes baked goods for grocery stores, and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurs
costs that are indirect costs for the divisions.
E (Click to view information for each division and the main headquarters.)
Read the requirements.
.....
Requirement 1. Allocate the indirect costs of Ford to each division equally. Calculate division operating income after allocation of headquarter costs. (Enter operating losses with minus signs
or parentheses.)
Bread
Cake
Doughnuts
Segment margin
$
7,200,000 $
1,400,000 $
6,200,000
Allocated headquarter costs
1,800,000
1,800,000
1,800,000
$
5,400,000 $
(400,000) $
4,400,000
Operating income (loss)
Requirement 2. Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. (Round allocation
proportions to three decimal places. Enter operating losses with minus signs or parentheses.)
Bread
Cake
Doughnuts
Segment margin
$
7,200,000 $
1,400,000 $
6,200,000
Allocated headquarter costs:
Human resources
1,610,000
460,000
230,000
Accounting department
975959
216368
607673
Rent and depreciation
320,000
80,000
240,000
180000
180000
180000
Other
463632
4942327
4114041
Operating income (loss)

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