P 7-7: Wasley

Wasley has three operating divisions. Each manager of a division is evaluated on that division's total

operating income. Managers are paid 10 percent of operating income as a bonus.

The AB division makes products A and B. The C division makes product C. The D division makes product

D. All four products use only direct labor and direct materials. However, a fixed (unavoidable) $1,784 corporate overhead is applied to each division (or product) based on direct labor dollars. In the following

operating income statement for the first quarter of the year, all numbers are in 000s.

Income Statement Product A Product B Product C Product D Net sales $1,250 $850 $1,250 $1 ,650 Dire ct labor 450 600 540 640 Dire ct materials 250 0 125 160 Corporate overhead