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    Overhead Allocation Problems

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    A company allocates overhead based on square feet to their 2 divisions, F and G. they have $20,000 of indirect costs.

    Divsion F
    Sales $20,000
    Direct costs $7,000
    Square feet $8,000

    Division G
    Sales $30,000
    Direct Costs $5,000
    Square feet $2,000

    Calculate the profit of each division after allocation.
    Why should the division that loses money not be shut down?
    Calculate the profit of each division if the indirect costs are allocated based on division profit.

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    Solution Summary

    This solution helps with a problem involving overhead allocation.