Cameron Company Has Two Major Segments with the Following Information

question 75

Essay

Cameron Company has two major segments with the following information:
$$\begin{array} { | l | r | r | r | } \hline & \text { East } & \text { West } & \text { Total } \\\hline \text { Annual Revenue } & \$ 400,000 & \$ 1,200,000 & \$ 1,600,000 \\\hline \text { Annual salesperson } & 300,000 & 450,000 & 760,000 \\\text { salaries } &\\\hline \text { Number of customers } & 60 & 90 & 150 \\\hline \text { Miles driven } & 180,000 & 120,000 & 300,000 \\\hline\end{array}$$
The business also has overhead costs as follows:
$$\begin{array} { | l | r | l | } \hline \text { Cost Pool } & \text { Cost in Pool } & \text { Cost driver } \\\hline \text { Travel } & \$ 72,000 & \text { Number of miles driven } \\\hline \text { Entertainment } & 288,000 & \text { Number of customers } \\\hline \text { Administrative } &\underline{ 289,000} & \text { Salaries } \\\hline \text { Total } & \$ 649,000 & \\\hline\end{array}$$
NOTE: overhead does not include salesperson salaries.Required:
a.Determine the income of each segment if overhead costs are allocated based on sales revenue.b.Determine the income of each segment if overhead costs are allocated using activity-based cost drivers.

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Definitions:

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