Exercise 7-28 (Algo) Departmental Cost Allocation [LO 7-3, 7-5] HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the following table: From Actuarial Premium Actuarial 20% Actuarial Premium rating Advertising Sales To Premium Rating Advertising Sales 80% 10% 10% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: $ 95,000 30,000 75,000 55,000 Required: 1. Determine the total costs of the advertising and sales departments after using the direct method of allocation. 2. Determine the total costs of the advertising and sales departments after using the step method of allocation. 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.
Exercise 7-28 (Algo) Departmental Cost Allocation [LO 7-3, 7-5] HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the following table: From Actuarial Premium Actuarial 20% Actuarial Premium rating Advertising Sales To Premium Rating Advertising Sales 80% 10% 10% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: $ 95,000 30,000 75,000 55,000 Required: 1. Determine the total costs of the advertising and sales departments after using the direct method of allocation. 2. Determine the total costs of the advertising and sales departments after using the step method of allocation. 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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![Exercise 7-28 (Algo) Departmental Cost Allocation [LO 7-3, 7-5]
HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments
(advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the
following table:
From
Actuarial
Premium
Actuarial
Premium rating
Advertising
Sales
Actuarial
20%
The direct operating costs of the departments (including both variable and fixed costs) are:
$ 95,000
30,000
75,000
55,000
To
Premium
Rating Advertising Sales
80%
10%
10%
20
60
Required:
1. Determine the total costs of the advertising and sales departments after using the direct method of allocation.
2. Determine the total costs of the advertising and sales departments after using the step method of allocation.
3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.
Required 1 Required 2
Complete this question by entering your answers in the tabs below.
Advertising department
Sales department
Required 3
Determine the total costs of the advertising and sales departments after using the direct method of allocation.
Total Cost Allocated](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc4a85354-e40b-4091-aa7c-927b8f28dfcb%2F0ae41d57-6ffd-4b1a-a03f-6635e6634fde%2F7heqcuh3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 7-28 (Algo) Departmental Cost Allocation [LO 7-3, 7-5]
HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments
(advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the
following table:
From
Actuarial
Premium
Actuarial
Premium rating
Advertising
Sales
Actuarial
20%
The direct operating costs of the departments (including both variable and fixed costs) are:
$ 95,000
30,000
75,000
55,000
To
Premium
Rating Advertising Sales
80%
10%
10%
20
60
Required:
1. Determine the total costs of the advertising and sales departments after using the direct method of allocation.
2. Determine the total costs of the advertising and sales departments after using the step method of allocation.
3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.
Required 1 Required 2
Complete this question by entering your answers in the tabs below.
Advertising department
Sales department
Required 3
Determine the total costs of the advertising and sales departments after using the direct method of allocation.
Total Cost Allocated
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