Loretto Outfitters is a retail chain of stores organized into two divisions $($East and West$)$ and a corporate headquarters. Corporate planners have prepared financial operating plans $($budgets$)$ for the two divisions for the upcoming year $($year $2).$ Selected information from the plans is as follows:

East West

Number of stores $2434$

Revenues $($$$000)$ $ $52,000$ $ $76,000$

Direct costs $($$$000)26,00036,000$

Division margin $($$$000)$ $ $26,000$ $ $40,000$

Based on information from various corporate staff, the planning team estimates that corporate overhead costs are expected to be $$24$ million in year $1.$ Of the $$24$ million, $$8\mathrm{.}0$ million is fixed and the remainder is variable. With respect to the variable overhead, $$6\mathrm{.}8$ million is variable with respect to revenue and the remainder is variable with respect to the number of stores. The two division managers are evaluated and compensated in part on division operating profit $($including any allocated corporate costs$)$ relative to the budget. Corporate overhead at Loretto is allocated based on relative revenues to determine both budgeted and actual operating profit.