Allocate the indirect headquarters costs of Reidland Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune,Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurscosts of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currentlyallocates this cost to the divisions based on the revenues of each division. The CEO has asked each divisionmanager to suggest an allocation base for the indirect headquarters costs from among revenues, segmentmargin, direct costs, and number of employees. The following is relevant information about each division:AcmeDuneStarkBrothers$16,500,00013,800,000$ 2,700,0001,500Revenues$23,400,000 $25,500,000 $18,600,00012,300,000$13,200,00012,000Direct costsSegment marginNumber of employees15,900,000$ 7,500,0006,00012,900,000$ 5,700,0004,500

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Allocate the indirect headquarters costs of Reidland Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs.

Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune,
Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurs
costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently
allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division
manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment
margin, direct costs, and number of employees. The following is relevant information about each division:
Acme
Dune
Stark
Brothers
$16,500,000
13,800,000
$ 2,700,000
1,500
Revenues
$23,400,000 $25,500,000 $18,600,000
12,300,000
$13,200,000
12,000
Direct costs
Segment margin
Number of employees
15,900,000
$ 7,500,000
6,000
12,900,000
$ 5,700,000
4,500

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