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: To Actuarial Premium Rating Advertising 10% 20 Sales From Actuarial Premium 80% 10% 60 20% The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $80,000 15,000 60,000 40,000 Required: 1. Determine the total costs of the advertising and sales departments after using the direct method or 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. (Do not round intermediate calculations. Round your final answers to 4 decimal places.) Total Cost Allocated Advertising department Sales department
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: To Actuarial Premium Rating Advertising 10% 20 Sales From Actuarial Premium 80% 10% 60 20% The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $80,000 15,000 60,000 40,000 Required: 1. Determine the total costs of the advertising and sales departments after using the direct method or 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. (Do not round intermediate calculations. Round your final answers to 4 decimal places.) Total Cost Allocated Advertising department Sales department
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What is the answer to the reciporcal method to four decimal places and how do you get the answer?
Transcribed Image Text: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:
To
Actuarial
Premium Rating Advertising
10%
20
Sales
From
Actuarial
Premium
80%
10%
60
20%
The direct operating costs of the departments (including both variable and fixed costs) are:
Actuarial
Premium rating
Advertising
Sales
$80,000
15,000
60,000
40,000
Required:
1. Determine the total costs of the advertising and sales departments after using the direct method or 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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. (Do not
round intermediate calculations. Round your final answers to 4 decimal places.)
Total Cost Allocated
Advertising department
Sales department
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