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Chapter 14 Internet Exercise

The Internet exercise is available to students only on the Prentice Hall Companion Website www.prenhall.com/horngren. Students can click on Cost Accounting, 11th ed., and access the Internet Exercise for the chapter, which links to the Web site of a company or organization. The Internet Exercise on the Web will be updated periodically so that it is current with the latest information available on the subject organization's Web site. A printout copy of the Internet exercise for this chapter as of early 2002 appears below.

The solution to the Internet exercise, which will also be updated periodically, is available to instructors from the Companion Website's faculty view. To access the solution, click on Cost Accounting, 11th ed., Faculty link, and then register once to obtain your password through the online form. After the initial registration, you will have a personal login ID and password to use to log in. A printout of the solution to the Internet exercise for this chapter as of early 2002 follows. The exercise and solution provide instructors with an idea of the content of the Internet exercise for this chapter.

Internet Exercise

In an effort to refocus its business and improve revenue growth Hewlett-Packard (HP) spun off its test and measurement business through a stock dividend to its shareholders. The newly formed company, Agilent Technologies, reported $757 million in earnings on revenues of $9.4 billion in its first year of operations. Prior to the spinoff, HP accounted for Agilent as a separate business segment.

1a.Go to Hewlett-Packard’s investor relations Web page, www.hp.com/hpinfo/investor/, click on the "SEC filings" link, and open the 10-K report filed on 1/27/00.  This is HP's 1999 annual report.  Scroll down to the segment information on page 49. What types of services and expense are shared between HP's four business segments?

1b.What is HP's rationale for sharing expenses and services between business segments?

1c.How does HP allocate the cost of shared expenses and services?

2.Why might HP face problems if it bases management compensation on the profitability of individual business segments?

3.  Go to Agilent Technologies’ Investor Relations Web page, www.investor.agilent.com/, click on the "Annual Report" link, and open the 2000 annual report.  Scroll down to footnote 14, "Transactions with Hewlett-Packard," on page 40.  

3a.What were Agilent's sales to HP for the period from November 1, 1999 to June 2, 2000?

3b.What were Agilent's purchases from HP in the period from November 1, 1999 through June 2, 2000?

4a.Prior to the spin-off, shared expenses were allocated between HP's business segments. How have Agilent and HP handled shared expenses since the spin-off?

4b.What was the value of shared services for November 1, 1999, to June 2, 2000?

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