CH 14 and 15 Solutions Horngren 13th Edition

CH 14 and 15 Solutions Horngren 13th Edition - CH 14 and 15...

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Unformatted text preview: CH 14 and 15 Solutions Horngren 13 th Edition 14-17 (15 min.) Allocating costs to divisions. 1. Allocations based on square feet. Refrigerator Stove Dishwasher Microwave Oven Total 1. Square feet 130,000 90,000 80,000 10,000 400,000 2. % square feet (130,000; 90,000; 80,000; 10,000 400,000) 32.5% 22.5% 20% 25% 100% 3. Allocated headquarter cost (Row 2 $14,255,000) $4,632,875 $3,207,375 $2,851,00 $3,563,750 $14,255,000 Refrigerator Stove Dishwasher Microwave oven Total Segment margin $5,200,000 $8,400,00 $5,300,000 $3,560,000 $22,460,000 Less: Headquarter costs 4,632,875 3,207,37 5 2,851,000 3,563,750 14,255,000 Division margin $ 567,125 $5,192,625 $2,449,000 $ (3,750 ) $ 8,205,000 Division margin Revenues 5.2 % 27.6 % 21.3 % (0.06) % 17.1 % Allocations based on segment margin. Refrigerator Stove Dishwasher Microwave Oven Total 1. Segment margin $5,200,000 $8,400,00 $5,300,000 $3,560,000 $22,460,000 2. % segment margin $5,200000; $8,400,000; $5,300,000; $3,560,000 $22,460,000 23.15% 37.40% 23.60% 15.85% 100% 3. Allocated headquarter cost (Row 2 $14,255,000) $3,300,033 $5,331,37 $3,364,180 $2,259,417 $14,255,000 Refrigerator Stove Dishwasher Microwave oven Total Segment margin $5,200,000 $8,400,00 $5,300,000 $3,560,000 $22,460,000 Less: Headquarter costs 3,300,033 5,331,37 3,364,180 2,259,417 14,225,000 Division margin $1,899,967 $3,068,63 $1,935,820 $1,300,583 $ 8,205,000 Division margin Revenues 17.4 % 16.3 % 16.8 % (19.2) % 17.1 % 2. I prefer the allocation based on segment margins because a cause-and-effect relationship may exist between headquarter costs and division segment margin headquarter staff are likely to spend more time on divisions that have more revenues and segment margins. Segment margins can also be justified on the ability- to-bear principle divisions with higher margins can bear more of the headquarter costs. The physical size of the divisions probably has no cause-and-effect relationship with headquarter costs. 3. None of the divisions should be dropped, since all four have positive segment margins before considering the headquarters cost allocation. As seen by these two options, the allocation of headquarter costs is arbitrary and should not serve as the basis for closing a division. Dropping the microwave division would be worthwhile only if the $3,563,750 of allocated headquarter costs could be saved if the microwave division is closed a very unlikely scenario. 14-21 (20- 30 min.) Customer profitability, service company. 1. Avery Okie Wizard Grainger Duran Revenues $260,000 $200,000 $322,000 $122,000 $212,000 Technician and equipment cost 182,000 175,000 225,000 107,000 178,000 Gross margin 78,000 25,000 97,000 15,000 34,000 Service call handling ($75 150; 240; 40; 120; 180) 11,250 18,000 3,000 9,000 13,500 Web-based parts ordering ($80 120; 210; 60; 150; 150) 9,600 16,800 4,800 12,000 12,000 Billing/Collection ($50 30; 90; 90; 60; 120) 1,500 4,500 4,500 3,000 6,000 Database maintenance...
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This note was uploaded on 01/16/2012 for the course X s taught by Professor S during the Spring '11 term at University of Central Florida.

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CH 14 and 15 Solutions Horngren 13th Edition - CH 14 and 15...

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