Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5) 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 The total costs incurred in the five departments are: $ 550,000 1,730,000 Information technology Operations Clains processing Administration Sales Total costs Support Departments Information Technology Operations 204 104 Direct Method b. Step Method (info Tech First) Step Method (Operations First) e Reciprocal Method 250,000 599,000 650,000 $3,707,000 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) Clains Processing Administration Sales 20% 40% 20% 10 se 30 Operating Departments Administration Claims Processing Sales S S $ S Total 0
Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5) 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 The total costs incurred in the five departments are: $ 550,000 1,730,000 Information technology Operations Clains processing Administration Sales Total costs Support Departments Information Technology Operations 204 104 Direct Method b. Step Method (info Tech First) Step Method (Operations First) e Reciprocal Method 250,000 599,000 650,000 $3,707,000 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) Clains Processing Administration Sales 20% 40% 20% 10 se 30 Operating Departments Administration Claims Processing Sales S S $ S Total 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5]
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
10%
The total costs incurred in the five departments are:
Information technology
Operations
Clains processing
Administration
Sales
Total costs
Support Departments
Information
Technology Operations
20%
Direct Method
b. Step Method (Info Tech First)
Step Method (Operations First)
e Reciprocal Method
$ 558,000
1,730,000
250,000
599,000
650,000
$3,787,000
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.)
Clains
Processing Administration
20%
40%
10
50
Operating Departments
Administration
Claims Processing
Sales
Sales
20%
30
S
$
$
$
Total
0
0
O
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F06a3ca83-b98a-4dd3-9639-3905786c01a4%2F76662058-0b47-485b-9ffb-b2f08558f925%2Fpgrybxi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5]
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
10%
The total costs incurred in the five departments are:
Information technology
Operations
Clains processing
Administration
Sales
Total costs
Support Departments
Information
Technology Operations
20%
Direct Method
b. Step Method (Info Tech First)
Step Method (Operations First)
e Reciprocal Method
$ 558,000
1,730,000
250,000
599,000
650,000
$3,787,000
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.)
Clains
Processing Administration
20%
40%
10
50
Operating Departments
Administration
Claims Processing
Sales
Sales
20%
30
S
$
$
$
Total
0
0
O
0
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