Requirements - X ring the h for each Data table 1. Allocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)? 2. Allocate 2017 fixed costs using the allocation bases suggested by Tailor. What is each division's operating margin percentage under the new allocation scheme? 3. Compare and discuss the results of requirements 1 and 2. If division performance incentives are based on operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why? 4. Which allocation scheme should Kunden Corporation use? Why? How might Tailor overcome any objections that may arise from the divisions? Data table e allocation ercentage of Pulp Paper Fibers Revenues $ 9,400,000 $ 17,500,000 $ 25,600,000 Direct manufacturing costs 3,600,000 Division administrative costs 3,200,000 8,200,000 2,000,000 10,700,000 4,800,000 $ 2,600,000 $ 7,300,000 $ 10,100,000 Division margin Number of employees S 455 S 325 $ 520 X is of division g new Fixed Corporate-Overhead Costs Human resource management Facility Corporate administration $ Suggested Allocation Bases 1,700,000 Number of employees 3,000,000 Floor space (square feet) 4,600,000 Division administrative costs 9,300,000 d costs as a Total Print Done operating 2. Kunden Corporation has three divisions: pulp, paper, and fibers. Kunden's new controller, Harry Tailor, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following information for each division for 2017: 1(Click the icon to view the data.) Until now, Kunden Corporation has allocated fixed corporate-overhead costs to the divisions on the basi division margins. Tailor asks for a list of costs that comprise fixed corporate overhead and suggests the new allocation bases: (Click the icon to view the fixed corporate overhead and new allocation bases.) Read the requirements Print Requirement 1. Allocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)? Allocate the fixed corporate-overhead costs, then calculate the division operating margins in dollars and as a percentage of revenue. (Round allocation proportions to one decimal place, X.X%, and dollar amounts to the nearest dollar. Enter operating margin percentages to one decimal, X.X%.) Pulp Paper Division margin $ 2,600,000 $ 7,300,000 Fibers $ 10,100,000 Allocated fixed corporate-overhead Operating margin Operating margin % % % % Requirement 2. Allocate 2017 fixed costs using the allocation bases suggested by Tailor. What is each division's operating margin percentage under the new allocation scheme? Allocate the fixed corporate-overhead costs, then calculate the division operating margins in dollars and as a percentage of revenue. (Round allocation proportions to one decimal place, X.X%, and dollar amounts to the nearest dollar. Round the operating margin percentages to one decimal, X.X%. Use parentheses or a minus sign for negative amounts.) Pulp Paper Fibers Division margin $ 2,600,000 $ 7,300,000 $ 10,100,000 Allocated fixed corporate-overhead costs: Human resource management Facility Corporate administration Operating margin Operating margin % % % % Requirement 3. Compare and discuss the results of requirements 1 and 2. If division performance incentives are based on operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why? When corporate overhead is allocated to the divisions on the basis of division margins (requirement 1), (1). are (is) profitable and the (2) (3) (5) division is the least profitable. When Tailor's suggested bases are used to allocate the different types of corporate overhead costs (requirement 2), the (4). division is the most profitable. division is the most profitable while the division is not profitable and the Print If division performance is linked to operating margin percentages, (6) welcome the change its operating margin percentage rises the most. will resist this new way of allocating corporate costs, which causes its operating margin to (7) will Requirement 4. Which allocation scheme should Kunden Corporation use? Why? How might Tailor overcome any objections that may arise from the divisions? The (9). (10). 1: Data Table is preferable because it is based on cause-and-effect relationships between costs and their respective cost drivers in the long run. To overcome objections from the divisions, Tailor may corporate overhead to divisions when evaluating performance. Pulp Revenues 9,400,000 $ Paper 17,500,000 $ Fibers 25,600,000 Direct manufacturing costs 3,600,000 3,200,000 8,200,000 2,000,000 10,700,000 4,800,000 Division administrative costs $ 2,600,000 $ 7,300,000 $ 10,100,000 Division margin Number of employees Floor space (square feet) $ 455 $ 60,800 $ 325 $ 34,770 $ 520 94,430 2: Data Table Tune bore to search. Fixed Corporate-Overhead Costs Human resource management Facility $ 1,700,000 Number of employees Corporate administration Suggested Allocation Bases 3,000,000 Floor space (square feet) 4,600,000 Division administrative costs Total $ 9,300,000 11:15 AM M 3: Requirements 1. Allocate 2017 fixed corporate-overhead costs to the three divisions using division margin as the allocation base. What is each division's operating margin percentage (division margin minus allocated fixed corporate-overhead costs as a percentage of revenues)? 2. Allocate 2017 fixed costs using the allocation bases suggested by Tailor. What is each division's operating margin percentage under the new allocation scheme? 3. Compare and discuss the results of requirements 1 and 2. If division performance incentives are based on operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why? 4. Which allocation scheme should Kunden Corporation use? Why? How might Tailor overcome any objections that may arise from the divisions? (1) each division the Paper and Fibers divisions the Pulp and Paper divisions (2) O Fibers Paper Pulp (3) O Fibers Paper Pulp OOO (4) O Fibers (5) Paper Fibers Paper (6) Pulp Pulp ooo Fibers Paper (7) decrease to a loss (negative operating margin). O increase significantly. (8) O Fibers Paper Pulp Pulp the Pulp and Fibers divisions (10) initially choose not to allocate (9) new approach old approach O just begin allocating