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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 Clates processing Administration Sales Support Departments Information technology Operations The total costs incurred in the five departments are: Total costs Information Technology Operations 20% 10% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 Claims Processing Administration 20% 10 40% 50 Sales 20% 30

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 Clates processing Administration Sales Support Departments Information technology Operations The total costs incurred in the five departments are: Total costs Information Technology Operations 20% 10% $ 567,000 1,550,000 340,000 550,000 580,000 $3,587,000 Claims Processing Administration 20% 10 40% 50 Sales 20% 30

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 Information technology i 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) Information Technology Operations 20% 10% cReciprocal Method $ 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 OOOO 0 0
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 Claims processing Administration Information technology i 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) Information Technology Operations 20% 10% cReciprocal Method $ 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 OOOO 0 0
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