Wilke Realty separates its activities into two operating divisions: Rentals and Sales. In March, the firm spent $52,000 for general company promotions (as opposed to advertisements for specific properties). John, the corporate controller, has decided to allocate general promotion costs to the two operating divisions. He is considering whether to base his allocations on the (1) expected increase in divisional revenue from the promotions or (2) expected increase divisional profit from the promotions (before allocated promotion costs). General promotions had the following effects on the two divisions: Rentals Sales Increase in divisional revenue $1,232,000 $168,000 Increase in profit (before allocated promotion costs) 167,200 136,800 a. Allocate the total promotion cost to the two divisions using change in revenue. Allocated Cost Rental $ Sales Total 24 b. Allocate the total promotion cost to the two divisions using change in profit before joint cost allocation.
Wilke Realty separates its activities into two operating divisions: Rentals and Sales. In March, the firm spent $52,000 for general company promotions (as opposed to advertisements for specific properties). John, the corporate controller, has decided to allocate general promotion costs to the two operating divisions. He is considering whether to base his allocations on the (1) expected increase in divisional revenue from the promotions or (2) expected increase divisional profit from the promotions (before allocated promotion costs). General promotions had the following effects on the two divisions: Rentals Sales Increase in divisional revenue $1,232,000 $168,000 Increase in profit (before allocated promotion costs) 167,200 136,800 a. Allocate the total promotion cost to the two divisions using change in revenue. Allocated Cost Rental $ Sales Total 24 b. Allocate the total promotion cost to the two divisions using change in profit before joint cost allocation.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 18E
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