Recall the example of the Mermaiden film distribution company’s planning for next year. Mermaiden has four films for which it has projections of demand, unit prices, and film-specific fixed and variable costs. In addition to the film-specific costs, Mermaiden has overhead of $150,000.

Download the data for the financial performance of these four films.

Mermaiden Films Projections (.xls)

Then, try out two different overhead allocation models:

1. Allocate overhead costs to each film equally
2. Allocate overhead costs to each film in proportion to its proportion of total sales

What are the merits and drawbacks of each allocation model? Do the two models of accounting for overhead lead to different business decisions?

Discuss your analysis in a two-page essay. Add tables and charts to back up your assertions.