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Arlington Clothing, Inc., shows the following information for its two divisions for year 1.

	Lake Region			Coastal Region
Sales revenue	$	4,060,000		$	13,000,000
Cost of sales		2,695,000			6,490,000
Allocated corporate overhead		243,600			780,000
Other general and administration		546,900			3,740,000

The results for year 2 have just been posted.

	Lake Region			Coastal Region
Sales revenue	$	4,060,000		$	9,680,000
Cost of sales		2,695,000			4,870,000
Allocated corporate overhead		304,500			726,000
Other general and administration		541,000			3,740,000

Required:

a. Compute divisional operating income for the two divisions for year 2.

	Lake Region Coastal Region Operating income

b-1. What are the gross margin and operating margin percentages for year 2 for both divisions?

	Lake Region Coastal Region Gross margin percentage % % Operating margin % %

b-2. How well have these divisions performed?

The reported divisional income for the Lake Region went down because sales fell in Coastal Region.checkbox unchecked1 of 6 Corporate overhead is allocated on the basis of relative revenues.checkbox unchecked2 of 6 Corporate overhead is allocated on the basis of absolute revenues.checkbox unchecked3 of 6 The performance of the Lake Region is affected by the results in the Coastal Region.checkbox unchecked4 of 6 The operating margin is greater in Lake Region.checkbox unchecked5 of 6 The gross margin percentage is higher in Coastal Region.checkbox unchecked6 of 6

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