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. Information technology Operations Support Departments Operating Departments Information Technology Operations 20% Claims Processing 20% Administration Sales 40% 20% 10% 10 50 30 The total costs incurred in the five departments are: Information technology Operations Administration Claims processing Sales Total costs $ 579,000 1,580,000 270,000 551,000 600,000 $ 3,580,000 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. Note: Do not round intermediate calculations. Round final answers to the nearest dollar. Method a Direct Method Claims Processing Cost Allocation Administration Cost Allocation Sales Cost Allocation Total $ ก.
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. Information technology Operations Support Departments Operating Departments Information Technology Operations 20% Claims Processing 20% Administration Sales 40% 20% 10% 10 50 30 The total costs incurred in the five departments are: Information technology Operations Administration Claims processing Sales Total costs $ 579,000 1,580,000 270,000 551,000 600,000 $ 3,580,000 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. Note: Do not round intermediate calculations. Round final answers to the nearest dollar. Method a Direct Method Claims Processing Cost Allocation Administration Cost Allocation Sales Cost Allocation Total $ ก.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 3E: For each of the following support departments, identify a cost driver that could be used for...
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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.
Information technology
Operations
Support Departments
Operating Departments
Information
Technology
Operations
20%
Claims Processing
20%
Administration
Sales
40%
20%
10%
10
50
30
The total costs incurred in the five departments are:
Information technology
Operations
Administration
Claims processing
Sales
Total costs
$ 579,000
1,580,000
270,000
551,000
600,000
$ 3,580,000
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.
Note: Do not round intermediate calculations. Round final answers to the nearest dollar.
Method
a Direct Method
Claims Processing
Cost Allocation
Administration
Cost Allocation
Sales Cost
Allocation
Total
$
ก.
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