Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5] 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 Operations The total costs incurred in the five departments are: Sales Support Departments Total costs Information Technology Operations 20% 10% $ 576,000 1,700,000 320,000 584,000 550,000 $ 3,730,000 Claims Processing Administration 20% 10 40% 50 Sales 20% 30 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.)
Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5] 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 Operations The total costs incurred in the five departments are: Sales Support Departments Total costs Information Technology Operations 20% 10% $ 576,000 1,700,000 320,000 584,000 550,000 $ 3,730,000 Claims Processing Administration 20% 10 40% 50 Sales 20% 30 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5]
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
Operations
The total costs incurred in the five departments are:
Sales
Support Departments
Total costs
Information
Technology
Operations
20%
10%
$ 576,000
1,700,000
320,000
584,000
550,000
$ 3,730,000
Claims
Processing Administration
20%
10
40%
50
Sales
20%
30
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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F28ebdfc0-db24-4a8d-b8eb-5f725c5f559e%2F3818062b-c19e-4742-97bf-d94fb3abd7cd%2F8pijym_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5]
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
Operations
The total costs incurred in the five departments are:
Sales
Support Departments
Total costs
Information
Technology
Operations
20%
10%
$ 576,000
1,700,000
320,000
584,000
550,000
$ 3,730,000
Claims
Processing Administration
20%
10
40%
50
Sales
20%
30
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.)
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