Company has three divisions and allocates central corporate costs of $17,500 to each division based on two different cost drivers that include revenue and cost of goods sold.
Division 1 Division 2 Division 3
Revenue $16,000 $20,000 $14,000
Cost of goods sold $14,000 $10,000 $16,000
Required:
A) Allocate the central corporate costs to each division using revenue as the cost driver.
B) Allocate the central corporate costs to each division using cost of goods sold as the cost driver.