REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 14, Problem 14.23E
Cost allocation to divisions. Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, your manager asks you to recommend the basis the hotel should use for allocating fixed
You are also given the following data on the three divisions:
You are told that you may choose to allocate indirect costs based on one of the following: direct costs, floor space, or the number of employees. Total fixed overhead costs for 2016 were $14,550,000
- 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs.
- 2. Allocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations, in dollars and as a percentage of revenues.
- 3. Discuss the results. How would you decide how to allocate indirect costs to the divisions? Why?
- 4. Would you recommend closing any of the three divisions (and possibly reallocating resources to other divisions) as a result of your analysis? If so, which division would you close and why?
Expert Solution & Answer
Trending nowThis is a popular solution!
Learn your wayIncludes step-by-step video
schedule08:25
Students have asked these similar questions
Calculate division margins in percentage terms prior to allocating fixed overhead costs.
Cost allocation to divisions. Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, your manager asks you to recommend the basis the hotel should use for allocating fixed overhead costs to the three divisions in 2017. You are presented with the following income statement information for 2016:
How would you decide how to allocate indirect costs to the divisions? Why?
Chapter 14 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Ch. 14 - Prob. 14.1QCh. 14 - Why is customer-profitability analysis an...Ch. 14 - Prob. 14.3QCh. 14 - A customer-profitability profile highlights those...Ch. 14 - Give examples of three different levels of costs...Ch. 14 - What information does the whale curve provide?Ch. 14 - A company should not allocate all of its corporate...Ch. 14 - What criteria might managers use to guide...Ch. 14 - Once a company allocates corporate costs to...Ch. 14 - A company should not allocate costs that are fixed...
Ch. 14 - How should a company decide on the number of cost...Ch. 14 - Show how managers can gain insight into the causes...Ch. 14 - How can the concept of a composite unit be used to...Ch. 14 - Explain why a favorable sales-quantity variance...Ch. 14 - How can the sales-quantity variance be decomposed...Ch. 14 - Flexible-budget variance, sales-quantity,...Ch. 14 - Sales-volume, sales-mix, and sales-quantity...Ch. 14 - Cost allocation in hospitals, alternative...Ch. 14 - Customer profitability, customer-cost hierarchy....Ch. 14 - Customer profitability, service company. Instant...Ch. 14 - Customer profitability, distribution. Best Drugs...Ch. 14 - Cost allocation and decision making. Reidland...Ch. 14 - Cost allocation to divisions. Rembrandt Hotel ...Ch. 14 - Cost allocation to divisions. Bergen Corporation...Ch. 14 - Prob. 14.25ECh. 14 - Variance analysis, working backward. The Hiro...Ch. 14 - Variance analysis, multiple products. Emcee Inc....Ch. 14 - Market-share and market-size variances...Ch. 14 - Click here to open your MyFinanceLab Study Plan...Ch. 14 - Customer profitability. Bracelet Delights is a new...Ch. 14 - Customer profitability, distribution. Green Paper...Ch. 14 - Customer profitability in a manufacturing firm....Ch. 14 - Customer-cost hierarchy, customer profitability....Ch. 14 - Allocation of corporate costs to divisions. Cathy...Ch. 14 - Cost allocation to divisions. Forber Bakery makes...Ch. 14 - Prob. 14.36PCh. 14 - Cost-hierarchy income statement and allocation of...Ch. 14 - Variance analysis, sales-mix and sales-quantity...Ch. 14 - Market-share and market-size variances...Ch. 14 - Variance analysis, multiple products. The Robins...Ch. 14 - Customer profitability and ethics. KC Corporation...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Ravenna Candles recently purchased candleholders for resale in its shops. Which of the following costs would be...
Financial Accounting (12th Edition) (What's New in Accounting)
Based on your answers to the above questions, should Lockwood invest in the machinery?
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
Quick ratio and current ratio (Learning Objective 7) 1520 min. Consider the following data: COMPANY A B C D Cas...
Financial Accounting, Student Value Edition (4th Edition)
(Record inventory transactions in the periodic system) Wexton Technologies began the year with inventory of 560...
Financial Accounting (11th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 14-23 Cost allocation to divisions. Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, your manager asks you to recommend the basis the hotel should use for allocating fixed overhead costs to the three divisions in 2017. You are presented with the following income statement information for 2016: You are also given the following data on the three divisions: You are told that you may choose to allocate indirect costs based on one of the following: direct costs, floor space, or the number of employees. Total fixed overhead costs for 2016 were $14,550,000. 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs. 2. Allocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations, in dollars and as a percentage of…arrow_forwardAllocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations, in dollars and as a percentage of revenues.arrow_forwardBaldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Employees Hours Department direct costs Costs Personnel Legal Complete this question by entering your answers in the tabs below. Total Personnel $ Personnel $ 10,800 $ 320,000 Required: a. Allocate the cost of the service departments to the operating divisions using the direct method. b. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. c. Allocate the cost of the service departments to the operating divisions using the reciprocal method. 320,000 $ 320,000 $ Required A Required B Required C Allocate the cost of the service departments to the operating divisions using the reciprocal method. Note: Do not round intermediate calculations. Round your final answers…arrow_forward
- Performance Auto Company operates a new car division (that sells high performance sports cars) and a performance parts division (that sells performance-improvement parts for family cars). Some division financial measures for 2017 are as follows: E (Click the icon to view the data.) Read the requirements. Data table rounded to one decimal place in the format X.X%.) Requirements New Car Performance 1. Calculate return on investment (ROI) for each division using operating income as a measure of income and total assets as a measure of investment. Division Parts Division 2. Calculate residual income (RI) for each division using operating income as a Total assets 2$ 35,000,000 $ 32,312,500 measure of income and total assets minus current liabilities as a measure of investment. Current liabilities 2$ 6,500,000 $ ৪,000,000 3. William Abraham, the New Car Division manager, argues that the performance parts division has "loaded up on a lot of short-term debt" to boost its RI. Operating income $4…arrow_forwardMackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company's human resources (HR) department. The annual costs of the HR department total $14,000,000 a year. You have the following selected information about the two divisions: Northern Southern Required: a. What is the HR cost that is charged to each division if the number of employees is used as the allocation basis? b. What is the HR cost that is charged to each division if the wage and salary expense total is used as the allocation basis? Required A Number of Wage and Salary Expense ($000) $ 173,600 106,400 Complete this question by entering your answers in the tabs below. Employees 2,310 1,890 Division Northern Southern What is the HR cost that is charged to each division if the number of employees is used as the allocation basis? Note: Do not round intermediate calculations. Enter your answers in dollars, not in millions or thousands. Required B HR Cost Required A Required B >…arrow_forwardMackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company's human resources (HR) department. The annual costs of the HR department total $15,000,000 a year. You have the following selected information about the two divisions: Northern Southern Required: a. What is the HR cost that is charged to each division if the number of employees is used as the allocation basis? b. What is the HR cost that is charged to each division if the wage and salary expense total is used as the allocation basis? Required A Number of Employees 2,365 1,935 Complete this question by entering your answers in the tabs below. Division Northern Southern Wage and Salary Expense ($000) $ 179,800 110, 200 Required B 40 What is the HR cost that is charged to each division if the number of employees is used as the allocation basis? Note: Do not round intermediate calculations. Enter your answers in dollars, not in millions or thousands. HR Costarrow_forward
- Atlanta Partners provides management consulting services to government and corporate clients. Atlanta has two support departments—administrative services (AS) and information systems (IS)—and two operating departments—government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Atlanta's cost records indicate the following: Read the requirements2. Requirement 1a. Allocate the two support departments' costs to the two operating departments using the direct method. (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Direct Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs…arrow_forwardAllocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division’s operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)?arrow_forwardBethany Corporation has three divisions: pulp, paper, and fibers. Bethany's new controller, Paul Wagner, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017: Until now, BethanyCorporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Wagner asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases: Read the requirements3. Requirement 1. Allocate 2017fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)? Allocate the fixed corporate-overhead costs, then calculate the division operating margins in dollars and as a percentage of revenue. (Round allocation…arrow_forward
- compute the ROI of each division, incorporating currentcost estimates as of 2017 for depreciation expense and long-term assets. Comment on the results.arrow_forwardAllocate 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.arrow_forwardWhich allocation base do you think the manager of the Brothers division would prefer? Explainarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY