8:36 Done Exercise Cost Allocation2.docx 14-17 Cost allocation and decision making. Greenbold Manufacturing has four divisions named after its locations: Arizona, Colorado, Delaware, and Florida. Corporate headquarters is in Minnesota. Greenbold corporate headquarters incurs $5,600,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number ot employees. The tollowing is relevant intor- mation about each division: Arizona Colorado Delawae Florida $7.800.000 00.000 $6,200,000 $5,500,000 300,0004,100,000 4300,000 4600,000 Segment margin $2,500,000 400000 $1,900,000 900,000 nues Direct costs Number of employees 2,000 ,000 1,500 500 1. Allocate the indirect headquarters costs of Greenbold Manufacturing to each of the four divisions using revenues, direct costs, segment margin, and number of employees as the allocation bases. Calculate operating margins for each division after allocating headquarters costs. 2 Which allocation base do you think the manager of the Florida division would prefer? Explain. 3 What factors would you consider in deciding which allocation base Greenbold should use? Suppose the Greenbold CEO decides to use direct costs as the allocation base. Should the Florida divi- sion be closed? Why or why not