Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served 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. Support Departments Information technology Operations Operating Departments Information Technology Operations 20% Claims Processing 20% Administration Sales 40% 20% 10% 10 30 The total costs incurred in the five departments are: Information technology Operations Claims processing Administration Sales $ 578,000 1,780,000 290,000 630,000 650,000 Total costs Required: $ 3,928,000 Determine the total costs in each of the three operating departments after departmental allocations, using (a) the direct method. (b

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
Information
Operating Departments
Claims
Technology
Operations
20%
Processing
20%
Administration
48%
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.)
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 Information Operating Departments Claims Technology Operations 20% Processing 20% Administration 48% 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.) 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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