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 Information technology Operations Claims processing Sales The total costs incurred in the five departments are: Total costs Support Departments a Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Information Technology 10% cReciprocal Method Operations 20% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 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.) Claims Processing Administration: 20% 40% 10 50 Operating Departments Administration Claims Processing Sales Sales 20% 30 $ $ S $ Total 0 0 0 0
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 Information technology Operations Claims processing Sales The total costs incurred in the five departments are: Total costs Support Departments a Direct Method b. Step Method (Info Tech First) Step Method (Operations First) Information Technology 10% cReciprocal Method Operations 20% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 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.) Claims Processing Administration: 20% 40% 10 50 Operating Departments Administration Claims Processing Sales Sales 20% 30 $ $ S $ Total 0 0 0 0
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
Information technology
Operations
Claims processing
Sales
The total costs incurred in the five departments are:
Total costs
Support Departments
a
Direct Method
b. Step Method (Info Tech First)
Step Method (Operations First)
Information
Technology
10%
c Reciprocal Method
Operations
20%
$ 567,000
1,550,000
340,000
550,000
580,000
$3,587,000
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.)
Claims
Processing Administration
20%
40%
10
50
Operating Departments
Administration
Claims Processing
Sales
$
$
S
Sales
20%
30
$
Total
OOOO
0
0
0
0
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