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Calculate the profit of division after allocation

Problem: 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

Q1. Calculate the profit of each division after allocation.

Q2. Why should the division that loses money not be shut down?

Q3. Calculate the profit of each division if the indirect costs are allocated based on division profit.

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Accounting Basics: Calculate the profit of division after allocation

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Accounting Basics: Calculate the profit of division after allocation

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