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ACC501 MOD4 SLP4 Part 4-The Allocation Problem

ACC501 MOD4 SLP4 Part 4-The Allocation Problem - The...

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The Allocation Problem ________________________ TUI University June 5, 2011 The Allocation Problem For the purposes of cost allocation analysis, the segment allocation has been considered. The company is organized into three segments that include consumer, pharmaceutical and medical devices and diagnostics. Following is a summary of the operating results for each segment for the fiscal year ended January 2, 2011 (Johnson & Johnson, 2010): Dollars in '000s Particulars Consumer Pharma Medical Device and Diagnostics Total Domestic Sales 5,519 12,519 11,412 29,450 International Sales 9,071 9,877 13,189 32,137 Total Sales $14,590 $22,396 $24,601 $61,587 Allocated Operating Expenses 2,342 7,086 8,272 17,700 Operating Profits 2,475 6,413 7,694 16,582 Unallocated Operating Expenses - - - 753 Total Operating Profits $2,475 $6,413 $7,694 $17,335 The above segment data illustrates that most of the expenses are either directly identified for a segment or are allocated to a segment on a reasonable basis. Only $753 million, representative of general corporate expenses, have been left unallocated. This
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