Chapter 2 Problem 2 Kahn Industry, Inc. has three divisions. The following information was available for last quarter. Division A Division B Division C Division D Revenues $200,000 $320,000 $140,000 $660,000 Cost of Goods $160,000 $240,000 $100,000 $500,000 (or services sold) Gross Margin $240,000 $80,000 $40,000 $160,000 Marketing and $18,000 $20,000 $12,000 $50,000 Administrative Costs Opening Profit $22,000 $60,000 $28,000 $110,000 Interest $10,000 Income Taxes $30,000 (30%) $70,000 Net Income The CEO of Kahn Industry wanted to allocate the interest cost of $10,000 to the three divisions. Required: Identify the cost object(s) and the cost pool. Allocate the interest cost based on each division's (1) revenues, (2) gross margin, and (3) operating profit. Draw a cost flow diagram assuming the allocation of interest cost is based on revenues.