Elba Consulting Associates (ECA) is organized into three divisions (Manufacturing, Retail, and Entertainment). Many support services, such as human resources, legal, and information technology, are provided by corporate staff. The corporate staff costs are allocated to the divisions based on divisional revenue. The resulting divisional operating profit (computed as divisional revenues less divisional direct costs less corporate cost allocations) is used to evaluate and compensate all division managers. The compensation plan consists of a fixed salary plus a bonus, which depends on the actual divisional operating profit compared to the target profit. The fixed salary for all three division managers is $500,000. The bonus consists of two parts. First, there is a "target bonus," which is a flat $25,000 for meeting the operating profit target. Second, there is an "incentive bonus," which is equal to 0.2% of salary for every thousand dollars of operating profit in excess of the target. The bonus amounts are not included in divisional operating profits. Partial target and actual results for the most recent year were as follows: Target ($000): Manufacturing Retail Entertainment Division revenues $ 20,000 $ 50,000 $ 30,000 Division direct costs 11,500 28,000 22,000 Division margin $ 8,500 $ 22,000 $ 8,000 Actual ($000): Manufacturing Retail Entertainment Division revenues $ 19,000 $ 48,000 $ 29,000 Division direct costs 11,000 27,000 21,500 Division margin $ 8,000 $ 21,000 $ 7,500 The target and actual corporate costs for the most recent year were as follows: Target ($000) Actual ($000) Variable costs $ 10,000 $ 9,600 Fixed costs 15,000 12,000 Total corporate costs $ 25,000 $ 21,600 Problem 12-51 (Static) Corporate Cost Allocation and Performance Measurement (LO 12-5) Part 1 Required: What are the target operating profits in each division for the most recent year after the corporate costs are allocated? What are the reported (actual) operating profits in each division for the most recent year after the corporate costs are allocated? What is the total bonus that will be paid to each of the three managers? Part 1 is correct What are the target operating profits in each division for the most recent year after the corporate costs are allocated? Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
Elba Consulting Associates (ECA) is organized into three divisions (Manufacturing, Retail, and Entertainment). Many support services, such as human resources, legal, and information technology, are provided by corporate staff. The corporate staff costs are allocated to the divisions based on divisional revenue. The resulting divisional operating profit (computed as divisional revenues less divisional direct costs less corporate cost allocations) is used to evaluate and compensate all division managers. The compensation plan consists of a fixed salary plus a bonus, which depends on the actual divisional operating profit compared to the target profit. The fixed salary for all three division managers is $500,000. The bonus consists of two parts. First, there is a "target bonus," which is a flat $25,000 for meeting the operating profit target. Second, there is an "incentive bonus," which is equal to 0.2% of salary for every thousand dollars of operating profit in excess of the target. The bonus amounts are not included in divisional operating profits.
Partial target and actual results for the most recent year were as follows:
| Target ($000): | Manufacturing | Retail | Entertainment |
|---|---|---|---|
| Division revenues | $ 20,000 | $ 50,000 | $ 30,000 |
| Division direct costs | 11,500 | 28,000 | 22,000 |
| Division margin | $ 8,500 | $ 22,000 | $ 8,000 |
| Actual ($000): | Manufacturing | Retail | Entertainment |
|---|---|---|---|
| Division revenues | $ 19,000 | $ 48,000 | $ 29,000 |
| Division direct costs | 11,000 | 27,000 | 21,500 |
| Division margin | $ 8,000 | $ 21,000 | $ 7,500 |
The target and actual corporate costs for the most recent year were as follows:
| Target ($000) | Actual ($000) | |
|---|---|---|
| Variable costs | $ 10,000 | $ 9,600 |
| Fixed costs | 15,000 | 12,000 |
| Total corporate costs | $ 25,000 | $ 21,600 |
Problem 12-51 (Static) Corporate Cost Allocation and Performance Measurement (LO 12-5) Part 1
Required:
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What are the target operating profits in each division for the most recent year after the corporate costs are allocated?
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What are the reported (actual) operating profits in each division for the most recent year after the corporate costs are allocated?
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What is the total bonus that will be paid to each of the three managers?
Part 1 is correct
What are the target operating profits in each division for the most recent year after the corporate costs are allocated?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
|
Part 2 is correct
What are the reported (actual) operating profits in each division for the most recent year after the corporate costs are allocated?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
|
Part 3?
What is the total bonus that will be paid to each of the three managers?
Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.
|
|
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