Comprehensive Insurance Company has three operating departments: claims processing, administration, and sales. These threeoperating departments are supported by two service departments: information technology and accounting. The support provided byinformation technology and accounting to the other departments is shown below.Operating DepartmentsSalesTotal costsInformation technologyAccountingThe total costs incurred in the five departments are:Information technologyAccountingClaims processingAdministrationa. Direct Methodb.Service DepartmentsStep Method (Info Tech First)Step Method (Accounting First)InformationTechnology10%c. Reciprocal MethodAccounting20%$ 579,0001,580,000270,000551,000600,000$ 3,580,000Required: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 accounting going first), and (c) the reciprocalmethod. (Do not round intermediate calculations. Round final answers to the nearest dollar.)$$$$Claims ProcessingClaimsProcessing20%10Operating DepartmentsAdministration543,800 $543,800 $701,800 $593,449Administration40%501,572,600 $1,572,600 $998,500 $SalesSales20%301,189,800 $1,189,800 $1,247,700 $$Total3,306,2003,306,2002,948,000593,449

Cost allocation is the process of identifying, aggregating, and assigning all the costs incurred in…

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 accounting going first), and (c) the reciprocal method. (Do not round intermediate calculations. Round final answers to the nearest dollar.)

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 accounting going first), and (c) the reciprocal method. (Do not round intermediate calculations. Round final answers to the nearest dollar.)

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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