The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROM TO Actuarial Rating Marketing Sales Actuarial 0 % 40 % 20 % 40 % Rating 25 % 0 % 37.5 % 37.5 % The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial $ 60,000 Premium Rating $ 40,000 Marketing $ 60,000 Sales $ 70,000
The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROM TO Actuarial Rating Marketing Sales Actuarial 0 % 40 % 20 % 40 % Rating 25 % 0 % 37.5 % 37.5 % The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial $ 60,000 Premium Rating $ 40,000 Marketing $ 60,000 Sales $ 70,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below:
| FROM | TO | ||||||||||
| Actuarial | Rating | Marketing | Sales | ||||||||
| Actuarial | 0 | % | 40 | % | 20 | % | 40 | % | |||
| Rating | 25 | % | 0 | % | 37.5 | % | 37.5 | % | |||
The direct operating costs of the departments (including both variable and fixed costs) were as follows:
| Actuarial | $ | 60,000 |
| Premium Rating | $ | 40,000 |
| Marketing | $ | 60,000 |
| Sales | $ | 70,000 |
The total cost accumulated in the sales department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar; assume that the actuarial department goes first):
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