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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. Operating Departments Information technology Operations Information technology Operations Claims processing Sales The total costs incurred in the five departments are: Total costs Support Departments a Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Information Technology 10% cReciprocal Method Operations 20% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 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.) Claims Processing Administration: 20% 40% 10 50 Operating Departments Administration Claims Processing Sales Sales 20% 30 $ $ S $ 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. Operating Departments Information technology Operations Information technology Operations Claims processing Sales The total costs incurred in the five departments are: Total costs Support Departments a Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Information Technology 10% cReciprocal Method Operations 20% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 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.) Claims Processing Administration: 20% 40% 10 50 Operating Departments Administration Claims Processing Sales Sales 20% 30 $ $ S $ 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. Operating Departments Information technology. Operations Information technology Operations Claims processing Sales The total costs incurred in the five departments are: Total costs Support Departments a Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Information Technology 10% c Reciprocal Method Operations 20% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 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.) Claims Processing Administration 20% 40% 10 50 Operating Departments Administration Claims Processing Sales $ $ S Sales 20% 30 $ Total OOOO 0 0 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. Operating Departments Information technology. Operations Information technology Operations Claims processing Sales The total costs incurred in the five departments are: Total costs Support Departments a Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Information Technology 10% c Reciprocal Method Operations 20% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 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.) Claims Processing Administration 20% 40% 10 50 Operating Departments Administration Claims Processing Sales $ $ S Sales 20% 30 $ Total OOOO 0 0 0 0
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