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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