Da 1BookAsk01PrintProblem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5)Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served bythree operating departments, which are necessary for providing the two types of products: claims processing, administration, andsales. These three operating departments are supported by two departments: information technology and operations. The supportprovided by information technology and operations to the other departments is shown below.Operating DepartmentsInformation technologyOperationsThe total costs incurred in the five departments are:Information technologyOperationsClains processingAdministrationSalesTotal costsa Direct Methodb.Support DepartmentsInformationTechnology Operations10%20%Step Method (Info Tech First)Step Method (Operations First)e Reciprocal Method$ 558,0001,730,000250,000599,000650,000$3,787,000Required:Determine the total costs in each of the three operating departments, after departmental allocations, using (a) the direct method. (b)the step method (first for information technology going first in the allocation and then for operations going first), and (c) the reciprocalmethod. (Do not round intermediate calculations. Round final answers to the nearest dollar.)ClainsProcessing Administration20%40%1050Operating DepartmentsAdministrationClaims ProcessingSalesSales20%30SS$STotal0000Check m

Direct costs are the expenses that are directly used for the production of goods and services for…

1 Book FO Ask 01 References Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5) 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. Operating Departments Information technology Operations Clains processing Administration Information technology Operations 10% The total costs incurred in the five departments are: Sales Total costs Support Departments Information Clains Technology Operations. Processing Administration. Sales 20% 20% 40% 10 50 Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Reciprocal Method s 558,000 1,730,000 250,000 599,000 650,000 $3,787,000 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 Administration Claims Processing Sales 20% 30 1 S S S Total 0 0 0 ol Check m

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