HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service departments efforts (in percentages) to the other departments is shown in the following table: To From Actuarial Premium Rating Advertising Sales Actuarial 70% 15% 15% Premium 20% 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 85,000 Premium rating 20,000 Advertising 65,000 Sales 45,000

Required:

1. Determine the total costs of the advertising and sales departments after using the direct method of allocation.

2. Determine the total costs of the advertising and sales departments after using the step method of allocation.

3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.