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% TO Premium Rating Advertising sales 70% 15% 15% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 81,000 Premium rating Advertising 16,000 61,000 41,000 Sales 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 20% TO Premium Rating Advertising sales 70% 15% 15% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 81,000 Premium rating Advertising 16,000 61,000 41,000 Sales 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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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: Actuarial Premium rating Advertising Sales From Actuarial Premium The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium Rating 80% 25% $ 87,000 22,000 67,000 47,000 Advertising department Sales department To Advertising Sales 15% 5% 15 Required 1 Required 2 Required 3 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. Complete this question by entering your…
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