HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the following table: From Actuarial Premium To Actuarial Premium Rating 20% Actuarial Premium rating Advertising Sales 80% The direct operating costs of the departments (including both variable and fixed costs) are: $80,000 15,000 60,000 40,000 Advertising Sales 10% 20 10% 60 Required: 1. Determine the total costs of the advertising and sales departments after using the direct method or 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.

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. (Do not
round intermediate calculations. Round your final answers to 4 decimal places.)
Advertising
department
Sales department
Answer is complete but not entirely correct.
$
$
Total Cost
Allocated
88,691.0000
106,310.0000
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation. (Do not round intermediate calculations. Round your final answers to 4 decimal places.) Advertising department Sales department Answer is complete but not entirely correct. $ $ Total Cost Allocated 88,691.0000 106,310.0000
HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments
(advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the
following table:
From
Actuarial
Premium
To
Actuarial Premium Rating
Actuarial
Premium rating
Advertising
Sales
-
20%
80%
$80,000
15,000
60,000
40,000
Advertising
10%
20
The direct operating costs of the departments (including both variable and fixed costs) are:
Sales
10%
60
Required:
1. Determine the total costs of the advertising and sales departments after using the direct method or 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.
Transcribed Image Text:HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is shown in the following table: From Actuarial Premium To Actuarial Premium Rating Actuarial Premium rating Advertising Sales - 20% 80% $80,000 15,000 60,000 40,000 Advertising 10% 20 The direct operating costs of the departments (including both variable and fixed costs) are: Sales 10% 60 Required: 1. Determine the total costs of the advertising and sales departments after using the direct method or 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.
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