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Workings for 1. :
Allocation base

Revenues
Segment Margin
Direct costs
No.of employees

Ratios to total under each allocation base( c

Revenues
Segment Margin
Direct costs
No.of employees

1..IndirectHQ costs allocated on the basis of revenues

Revenues
Less: Direct costs

Less:Allocated HQ costs
Operating margin

Indirect HQ costs allocated on the basis of direct cos

Revenues
Less: Direct costs

Less:Allocated HQ costs
Operating margin

Indirect HQ costs allocated on the basis of segment m

Revenues
Less: Direct costs

Less:Allocated HQ costs
Operating margin

Indirect HQcosts allocated on the basis of no.of emplo

Revenues
Less: Direct costs

Less:Allocated HQ costs
Operating margin

Summary of Operating Margins under 4 allocation bas

Revenues
Direct costs
Segment margin
No.of emp.

2. From the above summary of operating margins und

Florida manager will prefer
the No.of employees --base
as the incidence of allocated HQ costs are the least un
greter operating margin

3..
Allocation of indirect HQ costs to divisions must be ba
performed purely for the benefit of / or that can be reso
concerned--
so that the particular division is not unnecessarily burd
in turn show the profitability /efficiency of the division in

4. NO, the Florida Division should not be closed--

as before allocation of the HQ costs , the Florida Divis
margin of $ 900000
that contributes to meeting the HQ costs.
If this division is closed,overall profitability will be redu
segment contribution.

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