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 Claims processing Administration Sales Support Departments Information Technology Operations 20% Total costs $ 589,000 1,660,000 310,000 625,000 630,000 $ 3,814,000 Claims Processing Administration 20% 40% 10 50 Sales 20% 30 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.)
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 Claims processing Administration Sales Support Departments Information Technology Operations 20% Total costs $ 589,000 1,660,000 310,000 625,000 630,000 $ 3,814,000 Claims Processing Administration 20% 40% 10 50 Sales 20% 30 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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:
Information technology
Operations
claims processing
Administration
Sales
Total costs
Support Departments
Information
Technology Operations
20%
10%
a. Direct Method
b. Step Method (Info Tech First)
Step Method (Operations First)
cReciprocal Method
$589,000
1,660,000
310,000
625,000
630,000
$ 3,814,000
Claims
Processing Administration
20%
40%
10
50
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.)
Operating Departments
Administration
Claims Processing
Sales
20%
30
Sales
Total
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