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 Claims processing Administration Sales Information technology Operations 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) Reciprocal Method C Information Technology Operations 20% 10% $ 592,000 1,680,000 310,000 611,000 650,000 $3,843,000 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 Claims Processing Administration Sales Sales 20% 30 $ $ $ $ Total 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 Claims processing Administration Sales Information technology Operations 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) Reciprocal Method C Information Technology Operations 20% 10% $ 592,000 1,680,000 310,000 611,000 650,000 $3,843,000 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 Claims Processing Administration Sales Sales 20% 30 $ $ $ $ Total 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A-4
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
Claims processing
Administration
Information technology
Operations
The total costs incurred in the five departments are:
Sales
Total costs
Support Departments
a
Direct Method
b. Step Method (Info Tech First)
Step Method (Operations First)
Reciprocal Method
C.
Information
Technology
Operations
20%
10%
$ 592,000
1,680,000
310,000
611,000
650,000
$ 3,843,000
Claims
Processing Administration
20%
10
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
Claims Processing
Operating Departments
Administration
40%
50
Sales
LA LA
$
Sales
20%
30
$
$
$
Total
0
0
0
0
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