7-41: Departmental cost allocation insurance company: Comprehensive insurance co

Question

7-41: 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 products: claims processing, administration, and sales. These 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: infromation technology and operations. The support provided by information technology and operations to the other departments is shown below.

Support departments

Information technology operations

information --- 20%

Operations 10% ___

Operating Department

Claims processing Administration sales

Infromation 20% 40% 20%

operations 10 50 30

Use 4 or more 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 only.

Explanation / Answer

Solution:

It is assumed that Information technology and operations both have departmental cost of $4,350,000.

From Service Department Cost Allocation - Direct Method Service Department Operating Department Information Technology Operations Claim Procesing Administration Sales Direct charges of department $4,350,000.00 $4,350,000.00 Information Technology (2:4:2) -$4,350,000.00 $1,087,500.00 $2,175,000.00 $1,087,500.00 Operations (1:5:3) -$4,350,000.00 $483,333.33 $2,416,666.67 $1,450,000.00 Total $0.00 $0.00 $1,570,833.33 $4,591,666.67 $2,537,500.00

Related Questions

Navigate

• Browse (All)
• Browse 7
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.