1.Show the amount of the2020 advertising cost($1,500,000) that would be allocated to each of the divisions under the following criteria: a. Dobbins'allocation method based on actual number of cars sold b.The stand-alone method based on the amounts divisions would have spent on their own advertisingc.The incremental-allocation method, with divisions ranked on the basis of dollars they would have spent on advertising in 20202.Which method do you think is most equitable to the divisional sales managers? What other options might President Doug Dobbinshave for allocating the advertising costs? More Information:The manager of the East sales location, Mike Samson, was not happy. He complained that the new allocation method was unfair and increased his advertising costs significantly. The East location sold high volumes of low-priced used cars and most of the corporate advertising budget related to new car sales. Data tableActual Number ofCars Sold in 2020Advertising Costs in 2020 if DivisionsHad Bought the AdvertisingSales LocationEast2,970381,600West720487,600North2,160572,4003,150678,400South9,0002,120,000Total Doug Dandy Auto Sales uses different media to advertise its products (television, radio,newspaper, Internet, and so on). At the end of 2019, the company president, DougDandridge, decided that corporate headquarters would negotiate and pay for alIadvertising costs and allocate these costs to each of the company's four sales locationsbased on number of vehicles sold.If managers had done the same advertising on their own, their advertising costs and theactual number of cars sold would be as follows:H (Click the icon to view the data.)(Click the icon to view information about the east sales location.)(Click the icon to view the advertising information.)Read the resuirementsRequirement 1. Show the amount of the 2020 advertising cost ($1,400,000) that would be allocated to each of the divisions under the following criteria: (a) Dandridge's allocationmethod based on actual number of cars sold, (b) the stand-alone method based on the amounts divisions would have spent on their own advertising. (C) the incremental-allocationmethod, with divisions ranked on the basis of dollars they would have spent on advertising in 2020. (Do not round intermediary calculations. Round the fnal answer to the nearestwhole dollar. Enter a "O" for amount with a zero values.)(a.)Sales LocationCost AllocatedEastWestNorthSouth

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Answered: Show the amount of the 2020 advertising…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 18E

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Question

1.	Show the amount of the 2020 advertising cost ($1,500,000) that would be allocated to each of the divisions under the following criteria:
	a. Dobbins'allocation method based on actual number of cars sold
b.	The stand-alone method based on the amounts divisions would have spent on their own advertising
c.	The incremental-allocation method, with divisions ranked on the basis of dollars they would have spent on advertising in 2020
2.	Which method do you think is most equitable to the divisional sales managers? What other options might President Doug Dobbinshave for allocating the advertising costs?

More Information:

The manager of the East sales location, Mike Samson, was not happy. He complained that the new allocation method was unfair and increased his advertising costs significantly. The East location sold high volumes of low-priced used cars and most of the corporate advertising budget related to new car sales.

Data table
Actual Number of
Cars Sold in 2020
Advertising Costs in 2020 if Divisions
Had Bought the Advertising
Sales Location
East
2,970
381,600
West
720
487,600
North
2,160
572,400
3,150
678,400
South
9,000
2,120,000
Total

Doug Dandy Auto Sales uses different media to advertise its products (television, radio,
newspaper, Internet, and so on). At the end of 2019, the company president, Doug
Dandridge, decided that corporate headquarters would negotiate and pay for alI
advertising costs and allocate these costs to each of the company's four sales locations
based on number of vehicles sold.
If managers had done the same advertising on their own, their advertising costs and the
actual number of cars sold would be as follows:
H (Click the icon to view the data.)
(Click the icon to view information about the east sales location.)
(Click the icon to view the advertising information.)
Read the resuirements
Requirement 1. Show the amount of the 2020 advertising cost ($1,400,000) that would be allocated to each of the divisions under the following criteria: (a) Dandridge's allocation
method based on actual number of cars sold, (b) the stand-alone method based on the amounts divisions would have spent on their own advertising. (C) the incremental-allocation
method, with divisions ranked on the basis of dollars they would have spent on advertising in 2020. (Do not round intermediary calculations. Round the fnal answer to the nearest
whole dollar. Enter a "O" for amount with a zero values.)
(a.)
Sales Location
Cost Allocated
East
West
North
South

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