Departmental Cost Allocation; Insurance Company

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 services: claims processing, administration, and sales. These three operating departments are supported by two departments: information technology and facilities. The support provided by information technology and facilities to the other departments is shown below.

	Support Department			Operating Department
	Information Technology	Facilities		Claims Processing	Administration	Sales
Information Technology	-	30%		30%	20%	20%
Facilities	10%	-		20	40	30

The total costs incurred in the five department are:

Information technology (IT)	$600,000
Facilities	1,800,000
Claims processing	450,000
Administration	850,000
Sales	650,000
Total costs	$4,350,000

Using 4 decimal places (e.g. 33.3333%) in your calculations. Allocate the $4,350,000 total departmental costs to the three operating departments using (A_ Direct Method, (B) The step method (once for information technology and once for operations going first in the allocation) and (C) the recoprocal