Question

P 7–3: Slawson Slawson is a publicly traded Argentine company with three operating companies located in Argentina, the United States, and Germany. Slawson’s corporate headquarters in Buenos Aires oversees the three operating companies. The annual cost of the corporate headquarters, including office expenses, salaries, and legal and accounting fees, is 2.4 million pesos. The following table summarizes operating details of each of the three operating companies. Argentina United States Germany Number of employees 1,500 300 200 Net income (loss) in pesos (millions) (100) 400 500 Required: a. Allocate the 2.4 million pesos corporate headquarters cost to the three operating companies using number of employees in each operating company. b. Allocate the 2.4 million pesos corporate headquarters cost to the three operating companies using net income of each operating company as the allocation base. c. Discuss the advantages and disadvantages of allocating corporate headquarters costs using (1) employees and (2) net income.

Please type the Answer, thank you

Answer 1

ANSWER A
COST ALLOCATION		IN million pesos
	ARGENTINA	1.8
	US	0.36
	GERMANY	0.24
ANSWER B
COST ALLOCATION		IN million pesos
	ARGENTINA	-0.3
	US	1.2
	GERMANY	1.5
ANSWER C
	EMPLOYEE	NET INCOME
ADVANTAGE	There will always be positive cost allocation	Each Country will strive to perform better
DISADVANTAGE	The number of employees hired may depend on their efficiency and salary given to them	For case where there is loss, the HQ will have to pay to them