Symmetric Inc. has two profit centers (North and South) operating in different regions of the world. North
Question:
The CFO of Symmetric wants to allocate $ 80 million of fixed corporate- level overhead costs to the two divisions, and is considering one of two possible allocation schemes: (1) allocate the
$ 80 million based on the profits of the two profit centers, or (2) allocate the $ 80 million evenly, that is, $ 40 million to each division irrespective of the actual profits of the two profit centers.
Required:
Critically analyze the two alternative overhead allocation schemes and make a recommendation to senior management based on your analysis. Your recommendation should be supported by a rigorous quantitative analysis of the situation.
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Related Book For
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
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