Burwell Manufacturing is organized into two divisions (Agriculture and Mining) and a corporate headquarters. The financial group of the corporate staff prepared financial operating plans (budgets) for the two divisions for the upcoming year (year 1). Selected information from the plans is as follows: Employees (full-time equivalent, or FTE) Revenues ($000) Direct division costs ($000) Operating profit before allocation ($000) Agriculture 23 $ 8,000 5,200 $ 2,800 Mining 52 $ 17,000 13,300 $ 3,700 Corporate overhead costs are expected to be $3.5 million in year 1. Of the $3.5 million, $1.25 million is fixed and the remainder is variable. Two-thirds of the variable cost is variable with respect to revenue. The other third is variable with respect to the number of full-time equivalent (FTE) employees. Division managers are evaluated and compensated in part on division operating profit (including any allocated corporate costs) relative to the budget. Corporate overhead at Burwell is allocated based on relative revenues to determine both budgeted and actual operating profit.
Burwell Manufacturing is organized into two divisions (Agriculture and Mining) and a corporate headquarters. The financial group of the corporate staff prepared financial operating plans (budgets) for the two divisions for the upcoming year (year 1). Selected information from the plans is as follows: Employees (full-time equivalent, or FTE) Revenues ($000) Direct division costs ($000) Operating profit before allocation ($000) Agriculture 23 $ 8,000 5,200 $ 2,800 Mining 52 $ 17,000 13,300 $ 3,700 Corporate overhead costs are expected to be $3.5 million in year 1. Of the $3.5 million, $1.25 million is fixed and the remainder is variable. Two-thirds of the variable cost is variable with respect to revenue. The other third is variable with respect to the number of full-time equivalent (FTE) employees. Division managers are evaluated and compensated in part on division operating profit (including any allocated corporate costs) relative to the budget. Corporate overhead at Burwell is allocated based on relative revenues to determine both budgeted and actual operating profit.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 9E: Championship Sports Inc. operates two divisionsthe Winter Sports Division and the Summer Sports...
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![Burwell Manufacturing is organized into two divisions (Agriculture and Mining) and a corporate headquarters. The financial group of
the corporate staff prepared financial operating plans (budgets) for the two divisions for the upcoming year (year 1). Selected
information from the plans is as follows:
Employees (full-time equivalent, or FTE)
Revenues ($000)
Direct division costs ($000)
Operating profit before allocation ($000)
Agriculture
23
$ 8,000
5,200
$ 2,800
Mining
52
$ 17,000
13,300
$ 3,700
Corporate overhead costs are expected to be $3.5 million in year 1. Of the $3.5 million, $1.25 million is fixed and the remainder is
variable. Two-thirds of the variable cost is variable with respect to revenue. The other third is variable with respect to the number of
full-time equivalent (FTE) employees. Division managers are evaluated and compensated in part on division operating profit (including
any allocated corporate costs) relative to the budget. Corporate overhead at Burwell is allocated based on relative revenues to
determine both budgeted and actual operating profit.
Required:
a. What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d9da63c-6b59-4870-b245-1b6da95693d6%2Fa5a04ade-16ae-4750-b6cd-e9755f72c573%2Fhatso9q_processed.png&w=3840&q=75)
Transcribed Image Text:Burwell Manufacturing is organized into two divisions (Agriculture and Mining) and a corporate headquarters. The financial group of
the corporate staff prepared financial operating plans (budgets) for the two divisions for the upcoming year (year 1). Selected
information from the plans is as follows:
Employees (full-time equivalent, or FTE)
Revenues ($000)
Direct division costs ($000)
Operating profit before allocation ($000)
Agriculture
23
$ 8,000
5,200
$ 2,800
Mining
52
$ 17,000
13,300
$ 3,700
Corporate overhead costs are expected to be $3.5 million in year 1. Of the $3.5 million, $1.25 million is fixed and the remainder is
variable. Two-thirds of the variable cost is variable with respect to revenue. The other third is variable with respect to the number of
full-time equivalent (FTE) employees. Division managers are evaluated and compensated in part on division operating profit (including
any allocated corporate costs) relative to the budget. Corporate overhead at Burwell is allocated based on relative revenues to
determine both budgeted and actual operating profit.
Required:
a. What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated?
![Employees (FTE)
Revenues ($000)
Direct costs ($000)
Operating profit before allocation ($000)
Show Transcribed Text
What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
Required A Required B
Revenues
Direct costs
Operating profit before allocations
Corporate costs
Operating profit
What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
Mining
Agriculture
$
$
0
$
Agriculture
25
$ 10,400
7,400
$ 3,000
0 $
< Required A
S
0 $
0 $
Total
Mining
55
$ 15,600
13,600
$ 2,000
0
0
0
0
0
Required B >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d9da63c-6b59-4870-b245-1b6da95693d6%2Fa5a04ade-16ae-4750-b6cd-e9755f72c573%2F0rtu5ul_processed.png&w=3840&q=75)
Transcribed Image Text:Employees (FTE)
Revenues ($000)
Direct costs ($000)
Operating profit before allocation ($000)
Show Transcribed Text
What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
Required A Required B
Revenues
Direct costs
Operating profit before allocations
Corporate costs
Operating profit
What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
Mining
Agriculture
$
$
0
$
Agriculture
25
$ 10,400
7,400
$ 3,000
0 $
< Required A
S
0 $
0 $
Total
Mining
55
$ 15,600
13,600
$ 2,000
0
0
0
0
0
Required B >
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![Required A Required B
What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
Revenues
Direct costs
Operating profit before allocations
Corporate costs
Operating profit
Agriculture
$
$
0
0
$
$
Mining
< Required A
0
0
$
$
$
Total
0
0
0
0
0
Required B >](https://content.bartleby.com/qna-images/question/f00761e5-6ea2-4b64-9c87-d0591240e351/18e59855-7ad6-46db-84d9-a5e0c151d4a0/obbmgum_thumbnail.png)
Transcribed Image Text:Required A Required B
What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
Revenues
Direct costs
Operating profit before allocations
Corporate costs
Operating profit
Agriculture
$
$
0
0
$
$
Mining
< Required A
0
0
$
$
$
Total
0
0
0
0
0
Required B >
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