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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 Actuarial Actuarial Premium rating Advertising Sales 20% Premium Rating 80% To Advertising Sales 10% 10% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: $ 92,000 27,000 72,000 52,000 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. 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of

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 Actuarial Actuarial Premium rating Advertising Sales 20% Premium Rating 80% To Advertising Sales 10% 10% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: $ 92,000 27,000 72,000 52,000 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. 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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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 Actuarial Premium rating Advertising Sales Actuarial 20% Premium Rating 80% The direct operating costs of the departments (including both variable and fixed costs) are: $ 92,000 27,000 72,000 52,000 Required 1 Required 2 Advertising department Sales department To 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 allocation. 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. Advertising Sales 10% 10% 20 60 Complete this question by entering your answers in the tabs below. Required 3 Determine the total costs of the advertising and sales departments after using the direct method of allocation. Total Cost Allocated < Required 1 Required 2 >
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: From Actuarial Premium Actuarial Premium rating Advertising Sales Actuarial 20% Premium Rating 80% The direct operating costs of the departments (including both variable and fixed costs) are: $ 92,000 27,000 72,000 52,000 Required 1 Required 2 Advertising department Sales department To 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 allocation. 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. Advertising Sales 10% 10% 20 60 Complete this question by entering your answers in the tabs below. Required 3 Determine the total costs of the advertising and sales departments after using the direct method of allocation. Total Cost Allocated < Required 1 Required 2 >
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