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Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served by three operating departments, which are necessary for providing the two types of products: claims processing, administration, and sales. These three operating departments are supported by two departments: Information technology and operations. The support provided by information technology and operations to the other departments is shown below. Information technology Operations Support Departments Operating Departments Information Technology Clains Operations 20% Processing 20% Administration 40% Sales 20% 10% 10 50 30 The total costs incurred in the five departments are: Information technology Operations claims processing Administration Sales Total costs $ 578,000 1,780,000 290,000 630,000 650,000 $ 3,928,000 Required: Determine the total costs in each of the three operating departments, after departmental allocations, using (a) the direct method, (b) the step method (first for information technology going first in the allocation and then for operations going first), and (c) the reciprocal method. (Do not round intermediate calculations. Round final answers to the nearest dollar.) a. Direct Method b. Step Method (Info Tech First) Step Method (Operations First) c. Reciprocal Method Operating Departments Claims Processing Administration Sales Total 0 $ 0 $ 0 0

Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served by three operating departments, which are necessary for providing the two types of products: claims processing, administration, and sales. These three operating departments are supported by two departments: Information technology and operations. The support provided by information technology and operations to the other departments is shown below. Information technology Operations Support Departments Operating Departments Information Technology Clains Operations 20% Processing 20% Administration 40% Sales 20% 10% 10 50 30 The total costs incurred in the five departments are: Information technology Operations claims processing Administration Sales Total costs $ 578,000 1,780,000 290,000 630,000 650,000 $ 3,928,000 Required: Determine the total costs in each of the three operating departments, after departmental allocations, using (a) the direct method, (b) the step method (first for information technology going first in the allocation and then for operations going first), and (c) the reciprocal method. (Do not round intermediate calculations. Round final answers to the nearest dollar.) a. Direct Method b. Step Method (Info Tech First) Step Method (Operations First) c. Reciprocal Method Operating Departments Claims Processing Administration Sales Total 0 $ 0 $ 0 0

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 3DQ
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Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served by three operating departments, which are necessary for providing the two types of products: claims processing, administration, and sales. These three operating departments are supported by two departments: information technology and operations. The support provided by information technology and operations to the other departments is shown below. Information technology Operations Support Departments Operating Departments Information Technology 100% Operations 20% Clains Processing 20% Administration 40% Sales 20% 10 50 30 The total costs incurred in the five departments are: Information technology Operations claims processing Administration Sales Total costs $ 578,000 1,780,000 290,000 630,000 650,000 $ 3,928,000 Required: Determine the total costs in each of the three operating departments, after departmental allocations, using (a) the direct method, (b) the step method (first for information technology going first in the allocation and then for operations going first), and (c) the reciprocal method. (Do not round intermediate calculations. Round final answers to the nearest dollar.) Operating Departments Claims Processing Administration Sales Total a. Direct Method $ 0 b. Step Method (Info Tech First) $ 0 Step Method (Operations First) c. Reciprocal Method $ 0 $ 0
Transcribed Image Text:Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served by three operating departments, which are necessary for providing the two types of products: claims processing, administration, and sales. These three operating departments are supported by two departments: information technology and operations. The support provided by information technology and operations to the other departments is shown below. Information technology Operations Support Departments Operating Departments Information Technology 100% Operations 20% Clains Processing 20% Administration 40% Sales 20% 10 50 30 The total costs incurred in the five departments are: Information technology Operations claims processing Administration Sales Total costs $ 578,000 1,780,000 290,000 630,000 650,000 $ 3,928,000 Required: Determine the total costs in each of the three operating departments, after departmental allocations, using (a) the direct method, (b) the step method (first for information technology going first in the allocation and then for operations going first), and (c) the reciprocal method. (Do not round intermediate calculations. Round final answers to the nearest dollar.) Operating Departments Claims Processing Administration Sales Total a. Direct Method $ 0 b. Step Method (Info Tech First) $ 0 Step Method (Operations First) c. Reciprocal Method $ 0 $ 0
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