Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I Region II Region III Total Corporation Revenues $ 1,200,000 $ 1,650,000 $ 2,250,000 $ 5,100,000 Cost of sales 450,000 810,000 1,140,000 2,400,000 Selling, General and Administrative (all fixed) 420,000 630,000 850,000 1,900,000 Corporate overhead 432,000 Required: Compute divisional operating income for the three regions. Ignore taxes. How have these regions performed?

Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I Region II Region III Total Corporation Revenues $ 1,200,000 $ 1,650,000 $ 2,250,000 $ 5,100,000 Cost of sales 450,000 810,000 1,140,000 2,400,000 Selling, General and Administrative (all fixed) 420,000 630,000 850,000 1,900,000 Corporate overhead 432,000 Required: Compute divisional operating income for the three regions. Ignore taxes. How have these regions performed?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.3E

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	Region I	Region II	Region III	Total Corporation
Revenues	$ 1,200,000	$ 1,650,000	$ 2,250,000	$ 5,100,000
Cost of sales	450,000	810,000	1,140,000	2,400,000
Selling, General and Administrative (all fixed)	420,000	630,000	850,000	1,900,000
Corporate overhead				432,000

Required:

Compute divisional operating income for the three regions. Ignore taxes.
How have these regions performed?

Required A Required B
How have these regions performed?
1a. Based on division income, which region performed the best?
1b. Based on division income, which region performed the worst?
2a. Which region has the highest gross margin percentage?
2b. Which region has the lowest gross margin percentage?
3a. Which region has the highest operating margin percentage?
3b. Which region has the lowest operating margin percentage?
< Required A
Required B >

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Required A Required B
Compute residual income for the three regions. Ignore taxes.
Note: Do not round intermediate calculations. Round your answers to the ne
Residual Income
Region I
$ 210,000
Region II
$ 75,600 X $
< Required A
Region III
82,400 X
Require

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