Allocation of common costs. Jim Dandy Auto Sales uses all types of media to advertise its prod- ucts (television, radio, newspaper, Internet, and so on). At the end of 2016, the company president, Jim McKinnley, decided that all advertising costs would be incurred by corporate headquarters and allocated to each of the company's four sales locations based on number of vehicles sold. Jim was confident that his corporate purchasing manager could negotiate better advertising contracts on a corporate-wide basis than each of the sales managers could on their own. McKinnley budgeted total advertising cost for 2017 to be $1.6 million. He introduced the new plan to his sales managers just before the New Year. The managers had already drawn up their advertising plans for 2017 and the corporate plan would do the same advertising for them as they had planned. Total advertising costs for 2017 were $1,600,000. If the managers had done this same advertising on their own, their advertising costs would be as follows: Actual Number of Cars Advertising Costs in 2017 if Divisions Had Bought the Advertising $ 279,500 473,000 580,500 817,000 $2,150,000 Sales Location Sold in 2017 5,600 1,440 3,200 East West North 5,760 16,000 South The manager of the East sales location, Tom Stevens, was not happy. He complained that the new allocation method was unfair and increased his advertising costs significantly. The East location sold high volumes of low-priced used cars and most of the corporate advertising budget was related to new car sales.

The Height of Fashion Corporation evaluates the performance of the divisions of the company based on ROI and bonuses are based on divisional ROI. A divisional income statement for the Men’s Wear Division for the past year is given below. The company has invested assets of $50,000,000 in the Men’s Wear Division.  Height of Fashion: Men’s Wear Division Income StatementFor the year ended December 31, 2016Sales    $25,000,000    Cost of Goods Sold      10,000,000    Gross Profit    $15,000,000    Operating Expenses      4,000,000    Income from Operations    $11,000,000     a.    Compute the ROI for the Men’s Wear division for the past year. ANS: ¬¬¬¬¬__________________ b.    Height of Fashion also has a Women’s Wear Division.  Its ROI for the past year was 18%.  The company is considering expanding one of its divisions by investing additional assets into that division.  The company will only invest additional assets in one of the divisions, not both.  In which division should it invest?…

Required information [The following information applies to the questions displayed below.] The following information is departmental cost allocation with two service departments and two production departments. Percentage Service Provided to Department Service 1 (S1) Cost $ 43,000 S1 S2 P1 P2 0% 30% 35% 35% Service 2 (S2) 33,000 25 0 45 30 Production 1 (P1) 230,000 Production 2 (P2) 280,000 What is the amount of service department cost allocated to P1 and P2 using the direct method? Total Cost P1 P2 Allocated

am. 103.