Wilke Realty separates its activities into two operatingdivisions: Rentals and Sales.
In March, the firm spent $52,000 for general companypromotions (as opposed to
advertisements for specific properties). John, the corporatecontroller, has decided to
allocate general promotion costs to the two operatingdivisions. He is considering
whether to base his allocations on the (1) expected increasein divisional revenue
from the promotions or (2) expected increase in divisionalprofit from the promotions
(before allocated promotion costs). General promotions had thefollowing effects on
the two divisions:
Rentals Sales
Increase in divisional revenue $1,232,000 $168,000
Increase in profit (before allocated promotion costs) 167,200136,800
a. Allocate the total promotion cost to the two divisionsusing change in revenue.
Allocated Cost
Rental Answer
Sales Answer
Total Answer
b. Allocate the total promotion cost to the two divisionsusing change in profit before
joint cost allocation.
Allocated Cost
Rental Answer
Sales Answer
Total Answer
