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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Step 1: Define allocations of cost to support department
VIEWStep 2: a. Determine the cost allocated using direct method.
VIEWStep 3: b. 1 Determine the cost allocated using step method for IT
VIEWStep 4: b.2 Determine the costs allocated using step method for operations
VIEWStep 5: c. Estimate the cost using reciprocal method
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