In: Accounting
Arlington Clothing, Inc., shows the following information for its two divisions for year 1: Lake Region Coastal Region Sales revenue $ 4,160,000 $ 13,070,000 Cost of sales 2,691,300 6,535,000 Allocated corporate overhead 249,600 784,200 Other general and administration 553,900 3,755,000 Required: a. Compute divisional operating income for the two divisions. Ignore taxes. (Enter your answers in thousands of dollars rounded to 1 decimal place.) b-1. What are the gross margin and operating margin percentages for both divisions? (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.12).) b-2. How well have these divisions performed? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) The gross margin percentage is higher in Lake Region. Divisional income is greater in Coastal Region. The gross margin percentage is higher in Coastal Region. Corporate overhead appears to be allocated on the basis of revenues. The operating margin is greater in Lake Region. Divisional income is greater in Lake Region.
Answer:
Lake region | Coastal region | ||
a | Sales (A) | 4160000 | 13070000 |
Cost of Sales (B) | 2691300 | 6535000 | |
Gross Margin (C=A-B) | 1468700 | 6535000 | |
Allocated corporate overhead (D) | 249600 | 784200 | |
Other general and admin('E) | 553900 | 3755000 | |
Operating Income (F=C-D-E) | 665200 | 1995800 | |
b-1 | Sales (A) | 4160000 | 13070000 |
Gross Margin (C) | 1468700 | 6535000 | |
Gross Margin Percentage (C/A*100) | 35.31 | 50.00 | |
Operating Income (F) | 665200 | 1995800 | |
Operating Income Percentage (F/A*100) | 15.75 | 15.27 | |
b-2 | Following statements are correct | ||
Divisional income is greater in Coastal region | |||
Gross Margin % is higher in coastal region |