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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. Support Departments Information Technology Operating Departments Information technology Operations - Operations 20% 10% Claims Processing 20% 10 Administration Sales 40% 50 20% 30 The total costs incurred in the five departments are: Information technology Operations Claims processing Administration Sales Total costs $ 600,000 1,800,000 450,000 850,000 650,000 $ 4,350,000 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. (Round percentage calculations to 4 decimal places (e.g., 33.3333%). Do not round your intermediate calculations. Round your final answers to nearest whole dollar amount.)
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