Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 14, Problem 14.23E
Cost allocation to divisions. Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, your manager asks you to recommend the basis the hotel should use for allocating fixed overhead costs to the three divisions in 2017. You are presented with the following income statement information for 2016:
You are also given the following data on the three divisions:
You are told that you may choose to allocate indirect costs based on one of the following: direct costs, floor space, or the number of employees. Total fixed overhead costs for 2016 were $14,550,000
- 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs.
- 2. Allocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations, in dollars and as a percentage of revenues.
- 3. Discuss the results. How would you decide how to allocate indirect costs to the divisions? Why?
- 4. Would you recommend closing any of the three divisions (and possibly reallocating resources to other divisions) as a result of your analysis? If so, which division would you close and why?
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Martini Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes
a 300-room hotel, a casino, and a restaurant. As Martini's new controller, your manager asks you
to recommend the basis the hotel should use for allocating fixed overhead costs to the three
divisions in 2020. You are presented with the following income statement information for 2019:
(Click the icon to view the data.)
Requirement 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs. (Round your answers to two decimal places, X.XX.)
Restaurant
Casino
Hotel
42.69 %
Allocated fixed overhead costs
Operating margin
Operating margin %
Data table
Revenues
Direct costs
Segment margin
Division margin
Requirement 2. Allocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations, in
dollars and as a percentage of revenues
Allocate the indirect costs, then…
Cost allocation to divisions. Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, your manager asks you to recommend the basis the hotel should use for allocating fixed overhead costs to the three divisions in 2017. You are presented with the following income statement information for 2016:
Cost allocation to divisions. Bergen Corporation has three divisions: pulp, paper, and bers. Bergen’s new controller, David Fisher, is reviewing the allocation of xed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017:
Chapter 14 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 14 - Prob. 14.1QCh. 14 - Why is customer-profitability analysis an...Ch. 14 - Prob. 14.3QCh. 14 - A customer-profitability profile highlights those...Ch. 14 - Give examples of three different levels of costs...Ch. 14 - What information does the whale curve provide?Ch. 14 - A company should not allocate all of its corporate...Ch. 14 - What criteria might managers use to guide...Ch. 14 - Once a company allocates corporate costs to...Ch. 14 - A company should not allocate costs that are fixed...
Ch. 14 - How should a company decide on the number of cost...Ch. 14 - Show how managers can gain insight into the causes...Ch. 14 - How can the concept of a composite unit be used to...Ch. 14 - Explain why a favorable sales-quantity variance...Ch. 14 - How can the sales-quantity variance be decomposed...Ch. 14 - Flexible-budget variance, sales-quantity,...Ch. 14 - Sales-volume, sales-mix, and sales-quantity...Ch. 14 - Cost allocation in hospitals, alternative...Ch. 14 - Customer profitability, customer-cost hierarchy....Ch. 14 - Customer profitability, service company. Instant...Ch. 14 - Customer profitability, distribution. Best Drugs...Ch. 14 - Cost allocation and decision making. Reidland...Ch. 14 - Cost allocation to divisions. Rembrandt Hotel ...Ch. 14 - Cost allocation to divisions. Bergen Corporation...Ch. 14 - Prob. 14.25ECh. 14 - Variance analysis, working backward. The Hiro...Ch. 14 - Variance analysis, multiple products. Emcee Inc....Ch. 14 - Market-share and market-size variances...Ch. 14 - Click here to open your MyFinanceLab Study Plan...Ch. 14 - Customer profitability. Bracelet Delights is a new...Ch. 14 - Customer profitability, distribution. Green Paper...Ch. 14 - Customer profitability in a manufacturing firm....Ch. 14 - Customer-cost hierarchy, customer profitability....Ch. 14 - Allocation of corporate costs to divisions. Cathy...Ch. 14 - Cost allocation to divisions. Forber Bakery makes...Ch. 14 - Prob. 14.36PCh. 14 - Cost-hierarchy income statement and allocation of...Ch. 14 - Variance analysis, sales-mix and sales-quantity...Ch. 14 - Market-share and market-size variances...Ch. 14 - Variance analysis, multiple products. The Robins...Ch. 14 - Customer profitability and ethics. KC Corporation...
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