Executive salaries are charged to three operating divisions on the basis of capital investment in the three divisions. If the investment is $21.5 million in the Northern Division, $31.5 million in the Eastern Division, and $27.5 million in the Western Division, how should executive salaries of $466,900 be allocated to the three divisions?
To allocate the executive salaries to the three divisions, we need to determine the proportion of the total capital investment that each division represents.
First, we calculate the total capital investment:
Total Capital Investment = $21.5 million + $31.5 million + $27.5 million = $80.5 million
Next, we calculate the proportion of the total capital investment for each division:
Northern Division: $21.5 million / $80.5 million = 0.267
Eastern Division: $31.5 million / $80.5 million = 0.391
Western Division: $27.5 million / $80.5 million = 0.342
Now, we multiply each division's proportion by the total executive salaries to allocate the amount to each division:
Northern Division: 0.267 * $466,900 = $124,831.33 (rounded to $124,831)
Eastern Division: 0.391 * $466,900 = $182,330.90 (rounded to $182,331)
Western Division: 0.342 * $466,900 = $159,737.80 (rounded to $159,738)
Therefore, the executive salaries should be allocated as follows:
Northern Division: $124,831
Eastern Division: $182,331
Western Division: $159,738
To allocate the executive salaries to the three divisions based on capital investment, follow these steps:
Step 1: Calculate the total capital investment for all three divisions.
Total capital investment = Northern Division investment + Eastern Division investment + Western Division investment
Total capital investment = $21.5 million + $31.5 million + $27.5 million
Total capital investment = $80.5 million
Step 2: Calculate the allocation percentage for each division.
Northern Division allocation percentage = Northern Division investment / Total capital investment
Northern Division allocation percentage = $21.5 million / $80.5 million
Northern Division allocation percentage = 0.2667 or 26.67%
Eastern Division allocation percentage = Eastern Division investment / Total capital investment
Eastern Division allocation percentage = $31.5 million / $80.5 million
Eastern Division allocation percentage = 0.3913 or 39.13%
Western Division allocation percentage = Western Division investment / Total capital investment
Western Division allocation percentage = $27.5 million / $80.5 million
Western Division allocation percentage = 0.3420 or 34.20%
Step 3: Allocate the executive salaries to each division.
Northern Division allocation = Executive salaries * Northern Division allocation percentage
Northern Division allocation = $466,900 * 26.67%
Northern Division allocation = $124,586.163 or approximately $124,586
Eastern Division allocation = Executive salaries * Eastern Division allocation percentage
Eastern Division allocation = $466,900 * 39.13%
Eastern Division allocation = $182,590.970 or approximately $182,591
Western Division allocation = Executive salaries * Western Division allocation percentage
Western Division allocation = $466,900 * 34.20%
Western Division allocation = $159,722.580 or approximately $159,723
Therefore, the executive salaries should be allocated as follows:
Northern Division: $124,586
Eastern Division: $182,591
Western Division: $159,723
To allocate the executive salaries to the three divisions based on capital investment, you need to calculate the proportion of capital investment each division has to the total investment in all three divisions. Then, multiply that proportion by the total executive salaries to determine the allocation for each division.
First, calculate the total capital investment by adding the investments in the three divisions:
$21.5 million + $31.5 million + $27.5 million = $80.5 million
Next, calculate the proportion of capital investment for each division by dividing each division's investment by the total investment.
Northern Division:
$21.5 million / $80.5 million = 0.267
Eastern Division:
$31.5 million / $80.5 million = 0.391
Western Division:
$27.5 million / $80.5 million = 0.342
Now, multiply each division's proportion by the total executive salaries to find the allocation for each division:
Northern Division:
0.267 * $466,900 = $124,670.30
Eastern Division:
0.391 * $466,900 = $182,306.90
Western Division:
0.342 * $466,900 = $159,922.70
Therefore, the executive salaries of $466,900 should be allocated as follows:
- Northern Division: $124,670.30
- Eastern Division: $182,306.90
- Western Division: $159,922.70