Kiddo Company manufactures and ships children's stuffed animals across the nation. The following are profit statements for the company's two lines of business
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Stock Stuffed
Animals (Stock)
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Custom Stuffed
Animals (Custom)
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Sales
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$6,996,000
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$4,664,000
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Less direct costs
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2,470,000
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3,920,000
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Less allocated costs
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3,330,000
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1,180,000
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Income (loss) before taxes
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$1,196,000
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$(436,000)
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Costs that are easily associated with each line of business are included in the direct costs. Allocated costs include costs that are not directly traced to the business units. These costs include employee benefits, rent, telecommunications costs, and general and administrative costs, such as the salary of the CEO of Kiddo.
At the start of 2014, allocated costs were estimated as follows:
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Employee benefits
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$1,580,000
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Rent
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1,530,000
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Telecommunications
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481,000
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General and administrative costs
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919,000
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Total
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$4,510,000
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In the past, allocations have been based on headcount (the number of employees in each business unit). There were 240 employees in Stock and 80 employees in Custom. The new controller of Kiddo believes that the key driver of employee benefits and telecommunications costs is headcount. However, rent is driven by space occupied, and general and administrative costs are driven by relative sales. Kiddo rents 40,000 square feet; approximately 20,000 is occupied by Stock employees and 20,000 by Custom personnel.
Prepare profit reports for Stock and Custom, assuming the company allocates costs using headcount, space occupied, and sales as allocation bases. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).
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Stock Stuffed
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Custom Stuffed
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 Sales Direct costs Allocated costs Income (loss) before
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$6,996,000
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$4,664,000
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