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Tenet Engineering, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the

Tenet Engineering, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred:

Computer services (85% fixed)$347,000Building occupancy674,000Personnel costs174,000Total common costs$1,195,000

The following information is available concerning various activity measures and service usages by each of the divisions:

Division ADivision BArea occupied (square feet)26,90053,800Payroll$436,000$236,000Computer time (hours)280300Computer storage (megabytes)4,400-0-Equipment value$205,000$255,000Operating profit (pre-allocations)$767,500$707,500

If all common costs are allocated using operating profit as the allocation basis, what is the total cost allocated to Division B (rounded to the nearest whole dollar)?

Multiple Choice

  • $1,415,985.
  • $573,195.
  • $767,500.
  • $621,805.

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