Question
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. Operating Departments Information technology Operations Support Departments Information Claims Technology Operations Processing 20% 10% The total costs incurred in the five departments are: Information tec Operations Claims processi Sales Administration Total costs Required: $578,000 1,780,000 290,000 630,000 650,000 $3,928,000 20% 10 Administration Sales 40% 50 20% 30 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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