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Problem 7 - 4 1 ( Algo ) Departmental Cost Allocation; Service Company [ LO 7 - 3 , 7 - 5 ] Comprehensive Insurance
Problem Algo Departmental Cost Allocation; Service Company LO
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.
The total costs incurred in the five departments are:
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. Do not round intermediate calculations. Round final answers to the nearest dollar.
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