a. Fixed corporate costs are allocated on the basis of relative revenue. What is the target corporate cost for the Latin America division? b. Suppose that actual Latin America division revenues next year are $80 million, actual corporate revenues are $800 million, and actual corporate costs are $35,000 million. Compare the corporate costs that would have been allocated under the old method at Global Electronics and under the dual rate method.
a. Fixed corporate costs are allocated on the basis of relative revenue. What is the target corporate cost for the Latin America division? b. Suppose that actual Latin America division revenues next year are $80 million, actual corporate revenues are $800 million, and actual corporate costs are $35,000 million. Compare the corporate costs that would have been allocated under the old method at Global Electronics and under the dual rate method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Revenue ($000)
Latin America division............................... $ 75,000
Total Global Electronics revenue..................... $600,000
Fixed corporate costs ($000)......................... $ 18,000
Variable cost as a percentage of revenue.............2.5%
a. Fixed corporate costs are allocated on the basis of relative revenue. What is the target corporate cost for the Latin America division?
b. Suppose that actual Latin America division revenues next year are $80 million, actual corporate revenues are $800 million, and actual corporate costs are $35,000 million. Compare the corporate costs that would have been allocated under the old method at Global Electronics and under the dual rate method.
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