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Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served by three operating departments, which are
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. Information technology Operations Support Departments Operating Departments Information Technology Operations 20% Claims Processing 20% Administration 40% Sales 20% 10% 10 50 30 The total costs incurred in the five departments are: Information technology Operations Claims processing Administration Sales Total costs $ 553,000 1,770,000 290,000 631,000 590,000 $ 3,834,000 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.) a. Direct Method b. Step Method (Info Tech First) Operating Departments Claims Processing Administration Sales Total
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