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Cost-hierarchy income statement and allocation of corporate costs to customers. The Insurance Company insures homeowners in three regions of the United States: Eastern, Midwest, and South. In the past year, several hurricanes hit the Southern region of the United States, requiring payments to insured homeowners. Management of the company wishes to analyze the profitability of the three key regions and has gath- ered the following information: Eastern Midwest South Total $4,000,000 $2,600,000 $1,800,000 $8,400,000 6,362,000 $2,038,000 24.26% Revenue Customer-level costs 1,768,000 $1,080,000 $ 832,000 32% 2,920,000 1,674,000 Customer-level operating income Customer-level operating income percentage $ 126,000 7% 27% In addition to the customer-level costs above, the company also allocates $750,000 of corporate costs to each region based on the revenues of each region.

Cost-hierarchy income statement and allocation of corporate costs to customers. The Insurance Company insures homeowners in three regions of the United States: Eastern, Midwest, and South. In the past year, several hurricanes hit the Southern region of the United States, requiring payments to insured homeowners. Management of the company wishes to analyze the profitability of the three key regions and has gath- ered the following information: Eastern Midwest South Total $4,000,000 $2,600,000 $1,800,000 $8,400,000 6,362,000 $2,038,000 24.26% Revenue Customer-level costs 1,768,000 $1,080,000 $ 832,000 32% 2,920,000 1,674,000 Customer-level operating income Customer-level operating income percentage $ 126,000 7% 27% In addition to the customer-level costs above, the company also allocates $750,000 of corporate costs to each region based on the revenues of each region.

College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter25: Departmental Accounting
Section: Chapter Questions
Problem 9SPA: INCOME STATEMENT WITH DEPART MENTAL DIRECT OPERATING MARGIN AND TOTAL OPERATING INCOME Durwood...
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Should top management of The Insurance Company close down the South region? Explain.

Cost-hierarchy income statement and allocation of corporate costs to customers. The Insurance Company insures homeowners in three regions of the United States: Eastern, Midwest, and South. In the past year, several hurricanes hit the Southern region of the United States, requiring payments to insured homeowners. Management of the company wishes to analyze the profitability of the three key regions and has gath- ered the following information: Eastern Midwest South Total $4,000,000 $2,600,000 $1,800,000 $8,400,000 6,362,000 $2,038,000 24.26% Revenue Customer-level costs 1,768,000 $1,080,000 $ 832,000 32% 2,920,000 1,674,000 Customer-level operating income Customer-level operating income percentage $ 126,000 7% 27% In addition to the customer-level costs above, the company also allocates $750,000 of corporate costs to each region based on the revenues of each region.
Transcribed Image Text:Cost-hierarchy income statement and allocation of corporate costs to customers. The Insurance Company insures homeowners in three regions of the United States: Eastern, Midwest, and South. In the past year, several hurricanes hit the Southern region of the United States, requiring payments to insured homeowners. Management of the company wishes to analyze the profitability of the three key regions and has gath- ered the following information: Eastern Midwest South Total $4,000,000 $2,600,000 $1,800,000 $8,400,000 6,362,000 $2,038,000 24.26% Revenue Customer-level costs 1,768,000 $1,080,000 $ 832,000 32% 2,920,000 1,674,000 Customer-level operating income Customer-level operating income percentage $ 126,000 7% 27% In addition to the customer-level costs above, the company also allocates $750,000 of corporate costs to each region based on the revenues of each region.
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