The Goldfinch Corporation has branches in Cleveland, Columbus, and Cincinnati. In 2015, Cleveland had revenue of $5,000,000, Columbus had revenue of $4,000,000, and Cincinnati had revenue of $3,000,000.
Columbus had the highest contribution margin percentage of the three branches – 40 percent. Cleveland’s was 35 percent, and Cincinnati’s was 30 percent.
Cleveland had $500,000 of traceable fixed costs, Columbus had $400,000 of traceable fixed costs, and Cincinnati had $300,000. The Goldfinch Corporation had $1,000,000 of common fixed costs.
Goldfinch’s compensation plan provides that ten percent of the company’s income above $1,000,000 will be awarded to the three branches as a bonus.
Goldfinch has assigned to you the responsibility of awarding the 2015 bonus to its branches. Although you don’t get to award yourself any of the bonus money, you can earn 50 points by awarding it to the three branches.
Required:
(a) How much will each branch receive if the bonus is allocated to the three branches based on how much revenue each branch received?
(b) How much will each branch receive if the bonus is allocated to the three branches based on the contribution margin of each branch?
(c) How much will each branch receive if the bonus is allocated to the three branches based on the segment margin of each branch?