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Redrum Company Has Four Divisions and Allocates Central Costs to Each

Question 144

Essay

Redrum Company has four divisions and allocates Central costs to each division based on one of three cost drivers as follows:  North  South  East  West  Revenue $16,250$20,750$14,500$17,750 Cost of goods sold 10,25014,75010,50013,750 Total assets 20,00024,00019,25022,250\begin{array} { l l l l l } & \text { North } & \text { South } & \text { East } & \text { West } \\\text { Revenue } & \$ 16,250 & \$ 20,750 & \$ 14,500 & \$ 17,750 \\\text { Cost of goods sold } & 10,250 & 14,750 & 10,500 & 13,750 \\\text { Total assets } & 20,000 & 24,000 & 19,250 & 22,250\end{array} Total central costs were $17,500.
Required:
Allocate the Central costs to the four divisions based on the following cost drivers:
a. revenue
b. cost of goods sold
c. total assets

Correct Answer:

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a. $16,250 + $20,750 + $14,500 + $17,750...

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