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 Advertising Sales 10% 15 10% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 99,000 Premium rating Advertising Sales 34,000 79,000 59,000 To 25% Premium Rating 80% 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.

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 Advertising Sales 10% 15 10% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 99,000 Premium rating Advertising Sales 34,000 79,000 59,000 To 25% Premium Rating 80% 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.

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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