HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the following table: From Actuarial Premium Advertising Sales 15% 154 20% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: $ 97,000 32,000 77,000 57,000 Actuarial Premium rating Advertising Sales Required: TO Actuarial Premium Rating 70%
HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the following table: From Actuarial Premium Advertising Sales 15% 154 20% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: $ 97,000 32,000 77,000 57,000 Actuarial Premium rating Advertising Sales Required: TO Actuarial Premium Rating 70%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments
(advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the
following table:
Actuarial
Premium rating
Advertising
Sales
Actuarial
Advertising Sales
From
Actuarial
154
159
Premium
20%
20
60
The direct operating costs of the departments (including both variable and fixed costs) are:
To
Premium
Rating
70%
$ 97,000
32,000
77,000
57,000
Advertising department
Sales department
Required:
1. Determine the total costs of the advertising and sales departments after using the direct method of allocation,
2. Determine the total costs of the advertising and sales departments after using the step method of allocation where the Actuarial
Department is allocated first.
3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Determine the total costs of the advertising and sales departments after using the direct method of allocation.
Total Cost
Deadl
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