7-29 Departmental Cost Allocation HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribu- tion of each service department's efforts (in percentages) to the other departments is To From Actuarial Premium Rating Advertising Sales Actuarial 80% 10% 10% Premium 20% 20% 60% The direct operating costs of the departments (including both variable and fixed costs) are Actuarial Premium rating Advertising Sales S80,000 15,000 60,000 40,000 Required 1. Determine the total cost allocated to the advertising and sales departments using the direct method. 2. Determine the total cost allocated to advertising and sales using the step method. 3. Determine the total cost allocated to advertising and sales using the reciprocal method.
7-29 Departmental Cost Allocation HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribu- tion of each service department's efforts (in percentages) to the other departments is To From Actuarial Premium Rating Advertising Sales Actuarial 80% 10% 10% Premium 20% 20% 60% The direct operating costs of the departments (including both variable and fixed costs) are Actuarial Premium rating Advertising Sales S80,000 15,000 60,000 40,000 Required 1. Determine the total cost allocated to the advertising and sales departments using the direct method. 2. Determine the total cost allocated to advertising and sales using the step method. 3. Determine the total cost allocated to advertising and sales using the reciprocal method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![7-29 Departmental Cost Allocation HomeLife Life Insurance Company has two service departments
(actuarial and premium rating) and two production departments (advertising and sales). The distribu-
tion of each service department's efforts (in percentages) to the other departments is
To
From
Actuarial
Premium Rating
Advertising
10%
20%
Sales
10%
60%
Actuarial
80%
Premium
20%
The direct operating costs of the departments (including both variable and fixed costs) are
Actuarial
Premium rating
Advertising
Sales
$80,000
15,000
60,000
40,000
Required
1. Determine the total cost allocated to the advertising and sales departments using the direct method.
2. Determine the total cost allocated to advertising and sales using the step method.
3. Determine the total cost allocated to advertising and sales using the reciprocal method.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F350daaf7-ed7f-4461-b140-412aaf4d79e4%2F47a79396-70b2-48ca-b714-dc51328ce1b7%2F0r6ehr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:7-29 Departmental Cost Allocation HomeLife Life Insurance Company has two service departments
(actuarial and premium rating) and two production departments (advertising and sales). The distribu-
tion of each service department's efforts (in percentages) to the other departments is
To
From
Actuarial
Premium Rating
Advertising
10%
20%
Sales
10%
60%
Actuarial
80%
Premium
20%
The direct operating costs of the departments (including both variable and fixed costs) are
Actuarial
Premium rating
Advertising
Sales
$80,000
15,000
60,000
40,000
Required
1. Determine the total cost allocated to the advertising and sales departments using the direct method.
2. Determine the total cost allocated to advertising and sales using the step method.
3. Determine the total cost allocated to advertising and sales using the reciprocal method.
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