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14-26 (Cont’d.)

3.See Solution Exhibit 14-26 for answer.

Solution Exhibit 14-26

(in millions)

Oil & Gas

Upstream

Oil & Gas

Downstream

Chemical

Products

Copper

Mining

Total

Revenues

Operating costs

Allocated costs,

$0.10 per $1 revenue

Division income

$7,000

3,000

    700

$3,300

$16,000

15,000

  1,600

$   (600)

$4,000

3,800

    400

$  (200)

$3,000

3,200

    300

$  (500)

$30,000

25,000

3,000

$  2,000

Allocation Base

Oil & Gas

Upstream

Oil & Gas

Downstream

Chemical

Products

Copper

Mining

1.Allocated on basis of

identifiable assets

Total costs = $2,000

2.Allocated on basis of

revenues

Total costs = $600

3.Allocated on basis of

operating income (if

positive)

Total costs = $208

4.Allocated on basis of

number of employees

Total costs = $192

14/25

$1,120

7/30

$140

40/52

$160

9/30

$  57.6

6/25

$480

16/30

$320

10/52

$  40

12/30

$  76.8

3/25

$240

4/30

$  80

2/52

$   8

6/30

$  38.4

2/25

$160

3/30

$  60

--

$    0

3/30

$  19.2

Oil & Gas

Upstream

Oil & Gas

Downstream

Chemical

Products

Copper

Mining

Total

Revenues

Operating costs

Cost Pool 1 Allocation

Cost Pool 2 Allocation

Cost Pool 3 Allocation

Cost Pool 4 Allocation

Division income

$7,000

3,000

1,120

140

160

      57.6

$2,522.4

$16,000

15,000

480

320

40

       76.8

$      83.2

$4,000

3,800

240

80

8

      38.4

$  (166.4)

$3,000

3,200

160

60

0

      19.2

$  (439.2)

$30,000

25,000

2,000

600

208

      192

$  2,000

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