Tenet Engineering,Inc The Following Information Is Available Concerning Various Activity Measures and the Costs

question 5

Multiple Choice

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:
$$\begin{array} { | l | r | } \hline \text { Computer servic es ( } 85 \% \text { fixed) } & \$ 260,000 \\\hline \text { Building occupancy } & 600,000 \\\hline \text { Personnel costs } & \underline{110,000 }\\\hline \text { Total common costs } & \$ 970,000 \\\hline\end{array}$$ The following information is available concerning various activity measures and service usages by each of the divisions:
$$\begin{array} { | l | r | r | } \hline & \text { Dirision } A & \text { Division B } \\\hline \text { Area occupied (square teet) } & 20,000 & 40,000 \\\hline \text { Payroll } & \$ 380,000 & \$ 180,000 \\\hline \text { Computer time (hours) } & 200 & 220 \\\hline \text { Computer storage (megabytes) } & 4,050 & - 0 - \\\hline \text { Equipment value } & \$ 200,000 & \$ 250,000 \\\hline \text { Operating profit (pre-allocations) } & \$ 565,000 & \$ 495,000 \\\hline\end{array}$$ If all common costs are allocated using operating profit as the allocation basis,what is the total cost allocated to Division B?

• A) $457,286.
• B) $512,714.
• C) $555,000.
• D) $1,087,576.

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