Problem $12-53($Static$)$ Dual and Single Allocation Rates $($LO $12-6)$

Burwell Manufacturing is organized into two divisions $($Agriculture and Mining$)$ and a corporate headquarters. The financial group of the corporate staff prepared financial operating plans $($budgets$)$ for the two divisions for the upcoming year $($year $1).$ Selected information from the plans is as follows:

Agriculture Mining

Employees $($full$-$time equivalent, or FTE$)2352$

Revenues $($$$000)$ $ $8,000$ $ $17,000$

Direct division costs $($$$000)5,20013,300$

Operating profit before allocation $($$$000)$ $ $2,800$ $ $3,700$

Corporate overhead costs are expected to be $$3\mathrm{.}5$ million in year $1.$ Of the $$3\mathrm{.}5$ million, $$1\mathrm{.}25$ million is fixed and the remainder is variable. Two$-$thirds of the variable cost is variable with respect to revenue. The other third is variable with respect to the number of full$-$time equivalent $($FTE$)$ employees. Division managers are evaluated and compensated in part on division operating profit $($including any allocated corporate costs$)$ relative to the budget. Corporate overhead at Burwell is allocated based on relative revenues to determine both budgeted and actual operating profit.

Required:

What are the budgeted operating profits in each division for year $1$ after the corporate costs are allocated?

At the end of year $1,$ actual corporate costs incurred were $$3\mathrm{.}7$ million. Of the $$3\mathrm{.}7$ million, $$1\mathrm{.}44$ million was fixed, $$1\mathrm{.}3$ million was variable with respect to revenues, and $$0\mathrm{.}96$ million was variable with respect to FTEs. Actual division results in year $1,$ prior to any allocation, are as follows:

Agriculture Mining

Employees $($FTE$)2555$

Revenues $($$$000)$ $ $10,400$ $ $15,600$

Direct costs $($$$000)7,40013,600$

Operating profit before allocation $($$$000)$ $ $3,000$ $ $2,000$

What are the actual $($reported$)$ operating profits in each division for year $1$ after the corporate costs are allocated?