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 $ 6,360 3,400 $ 2,960 Corporate overhead costs are expected to be $4.2 million in year 1. Of the $4.2 million, $1.95 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. Employees (FTE) Revenues ($000) Direct costs ($000) Operating profit before allocation ($000) Mining 52 $ 14,840 9,500 $ 5,340 Required: a. What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated? b. At the end of year 1, actual corporate costs incurred were $4.4 million. Of the $4.4 million, $2.15 million was fixed, $10.8 million was variable with respect to revenues, and $0.96 million was variable with respect to FTEs. Actual division results in year 1, prior to any allocation, are as follows: Agriculture 25 $ 8,880 3,900 $ 4,980 Mining 55 $ 13,320 11,100 $ 2,220 What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
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 $ 6,360 3,400 $ 2,960 Corporate overhead costs are expected to be $4.2 million in year 1. Of the $4.2 million, $1.95 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. Employees (FTE) Revenues ($000) Direct costs ($000) Operating profit before allocation ($000) Mining 52 $ 14,840 9,500 $ 5,340 Required: a. What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated? b. At the end of year 1, actual corporate costs incurred were $4.4 million. Of the $4.4 million, $2.15 million was fixed, $10.8 million was variable with respect to revenues, and $0.96 million was variable with respect to FTEs. Actual division results in year 1, prior to any allocation, are as follows: Agriculture 25 $ 8,880 3,900 $ 4,980 Mining 55 $ 13,320 11,100 $ 2,220 What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
$ 6,360
3,400
$ 2,960
Corporate overhead costs are expected to be $4.2 million in year 1. Of the $4.2 million, $1.95 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.
Employees (FTE)
Revenues ($000)
Direct costs ($000)
Operating profit before allocation ($000)
Mining
52
$ 14,840
9,500
$ 5,340
Required:
a. What are the budgeted operating profits in each division for year 1 after the corporate costs are allocated?
b. At the end of year 1, actual corporate costs incurred were $4.4 million. Of the $4.4 million, $2.15 million was fixed,
$10.8 million was variable with respect to revenues, and $0.96 million was variable with respect to FTES. Actual
division results in year 1, prior to any allocation, are as follows:
Agriculture
25
$ 8,880
3,900
$ 4,980
Mining
55
$ 13,320
11,100
$ 2,220
What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allocated?
Transcribed Image Text:Required A
Required B
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
Total
Revenues
Direct costs
Operating profit before allocations
Corporate costs
Operating profit
Required A Required B
Agriculture
Revenues
Direct costs
Operating profit before allocations
Corporate costs
Operating profit
$
$
$
0
69
$
0 $
0 $
What are the actual (reported) operating profits in each division for year 1 after the corporate costs are allo
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
Agriculture
69
0 $
0
Mining
$
59
0 $
$
0 $
0
69
0
0
0
0
$
Total
0
0
0
0
0
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