Do not give image format Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5]Comprehensive Insurance Company has two product lines: health insurance and auto insurance. The two product lines are served bythree operating departments, which are necessary for providing the two types of products: claims processing, administration, andsales. These three operating departments are supported by two departments: information technology and operations. The supportprovided by information technology and operations to the other departments is shown below.Operating DepartmentsInformation technologyOperationsThe total costs incurred in the five departments are:Information technology$ 558,000Operations1,730,000Claims processingAdministrationSalesSupport DepartmentsInformationTechnology Operations20%Total costs10%250,000599,000650,000$ 3,787,000ClaimsProcessing Administration20%40%1050Required: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 reciprocalmethod. (Do not round intermediate calculations. Round final answers to the nearest dollar.)Operating DepartmentsClaims Processing AdministrationSales20%30SalesTotal

Direct costs are the expenses that are directly used for the production of goods and services for…

Problem 7-41 (Algo) Departmental Cost Allocation; Service Company [LO 7-3, 7-5) 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. Operating Departments Information technology Operations Claims processing Administration Sales Support Departments Information technology Operations 10% The total costs incurred in the five departments are: Total costs Information Technology Operations 20% $ 558,000 1,730,000 250,000 599,000 650,000 $ 3,787,000 Claims Processing Administration 20% 40% 10 50 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.) Operating Departments Claims Processing Administration Sales 20% 30 Sales Total

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter4: Job-order Costing And Overhead Application

Section: Chapter Questions

Problem 64P: (Appendix 4B) Support Department Cost Allocation MedServices Inc. is divided into two operating...