Marianna Realty has two operating divisions: Leasing and Sales. In March 2001, the firm spent $$\$ 100,000$$ for general company promotions (as opposed to advertisements promoting specific properties). Sally Savoie, the corporate controller, is now faced with the task of fairly allocating the promotion costs to the two operating divisions.
Sally has reduced the potential bases for allocating the promotion costs to two alternatives: the expected revenue to be generated from the promotions for each division, or the expected profit to be generated from the promotions in each division.
The promotions are expected to have the following effects on the two divisions:
$$
\begin{array}{lrr}
\text { Increase in revenue } & \$ 800,000 & \$ 1,600,000 \\
\text { Increase in net income before allocated promotion costs } & 150,000 & 100,000
\end{array}
$$
a. Allocate the total promotion costs to the two divisions using change in revenue.
b. Allocate the total promotion costs to the two divisions using change in net income before joint cost allocation.
c. Which of the two approaches is most appropriate? Explain.