Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisiona performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: EN Revenues Cost of sales Selling, General and Administrative (all fixed) 420,000 630,000 Corporate overhead Region I Region II Region III Total Corporation $ 1,200,000 $1,650,000 $2,250,000 $5,100,000 450,000 810,000 1,140,000 2,400,000 850,000 1,900,000 432,000 Required: Compute divisional operating income for the three regions. Ignore taxes. How have these regions performed?
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisiona performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: EN Revenues Cost of sales Selling, General and Administrative (all fixed) 420,000 630,000 Corporate overhead Region I Region II Region III Total Corporation $ 1,200,000 $1,650,000 $2,250,000 $5,100,000 450,000 810,000 1,140,000 2,400,000 850,000 1,900,000 432,000 Required: Compute divisional operating income for the three regions. Ignore taxes. How have these regions performed?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional
performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales).
The following information is from Lauderdale's first year of operations:
Region I
$ 1,200,000
Revenues
Cost of sales
Selling, General and Administrative (all fixed) 420,000
Corporate overhead
450,000
Region II
$1,650,000
810,000
630,000
Required:
Compute divisional operating income for the three regions. Ignore taxes.
How have these regions performed?
Region III Total Corporation
$2,250,000 $5,100,000
1,140,000 2,400,000
850,000
1,900,000
432,000
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