Reference no: EM133004517

A.G. Mills Inc. operates two production divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions.

During February, the following common costs were incurred:

Data processing services (85% fixed) $260,000

Building rent $600,000

Payroll $110,000

Total Common Costs $970,000

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

                                                       Division 1              Division 2

Area occupied (sq. feet)               40,000                20,000

Payroll                                       $180,000            $380,000

Equipment value                           $250,000            $200,000

Computer time (hours)                         220                  200

Computer storage (megabytes)                0                   4,050

Operating profit (pre-allocations)           $495,000         $555,000

Problem 1: Using the most appropriate allocation basis, what are the total common costs allocated to Division 2?