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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 Information Operating Departments 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 $ 600,000 1,800,000 450,000 Sales Total costs Required: 850,000 650,000 $ 4,350,000 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.) Operating Departments Claims Processing Administration a. Direct Method b. Step Method (Info Tech First) Step Method (Operations First) C. Reciprocal Method Sales Total
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