Arlington Clothing, Inc., shows the following information for its two divisions

Question

Arlington Clothing, Inc., shows the following information for its two divisions for year Sales revenue Cost of sales Allocated corporate overhead Other general and administration $4,050,000 2,636,300 243,000 542,900 $12,960,000 6,480,000 777,600 3,744,000 Required a. Compute divisional operating income for the two divisions. Ignore taxes. (Enter your answers in thousands of dollars rounded to 1 decimal place.) e Region Coastal Region Operating income 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).) Lake Region Coastal Region Gross margin Operating margin 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.

Explanation / Answer

Lake region Coastal region a Sales (A)          4,050,000          12,960,000 Cost of Sales (B)          2,636,300            6,480,000 Gross Margin (C=A-B)          1,413,700            6,480,000 Allocated corporate overhead (D)              243,000                776,000 Other general and admin('E)              542,900            3,744,000 Operating Income (F=C-D-E)              627,800            1,960,000 b-1 Sales (A)          4,050,000          12,960,000 Gross Margin (C)          1,413,700            6,480,000 Gross Margin Percentage (C/A*100)                  34.91                     50.00 Operating Income (F)              627,800            1,960,000 Operating Income Percentage (F/A*100)                  15.50                     15.12 b-2 Following statements are correct Divisional income is greater in Coastal region Gross Margin % is higher in coastal region

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