Cost allocation to divisions. Bergen Corporation has three divisions: pulp, paper, and fibers. Bergen's new controller, David Fisher, 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: Pulp $19,600,000 Paper $34,200,000 $51,000,000 15,600,000 4,000,000 $ 6,000,000 $14,600,000 $19,400,000 300 70,680 Fibers Revenues Direct manufacturing costs Division administrative costs 7,000,000 22,200,000 6,600,000 9,400,000 Division margin Number of employees Floor space (square feet) 600 1,100 202,920 106,400 Until now, Bergen Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Fisher asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases: Fixed Corporate-Overhead Costs Human resource management Facility Corporate administration Suggested Allocation Bases $ 4,600,000 Number of employees 6,400,000 Floor space (square feet) 9,200,000 $20,200,000 Division administrative costs Total
Cost allocation to divisions. Bergen Corporation has three divisions: pulp, paper, and fibers. Bergen's new controller, David Fisher, 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: Pulp $19,600,000 Paper $34,200,000 $51,000,000 15,600,000 4,000,000 $ 6,000,000 $14,600,000 $19,400,000 300 70,680 Fibers Revenues Direct manufacturing costs Division administrative costs 7,000,000 22,200,000 6,600,000 9,400,000 Division margin Number of employees Floor space (square feet) 600 1,100 202,920 106,400 Until now, Bergen Corporation has allocated fixed corporate-overhead costs to the divisions on the basis of division margins. Fisher asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases: Fixed Corporate-Overhead Costs Human resource management Facility Corporate administration Suggested Allocation Bases $ 4,600,000 Number of employees 6,400,000 Floor space (square feet) 9,200,000 $20,200,000 Division administrative costs Total
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 6E: Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing...
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Which allocation scheme should Bergen Corporation use? Why? How might Fisher overcome any objections that may arise from the divisions?
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