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HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales).
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:
To
Premium
From Actuarial Rating Advertising Sales
Actuarial — 80% 10% 10%
Premium 25% — 15 60
The direct operating costs of the departments (including both variable and fixed costs) are:
Actuarial $99,000
Premium rating 34,000
Advertising 79,000
Sales 59,000
Required:
1.Determine the total cost allocated to the advertising and sales departments using the direct method
Total Cost Allocated
Advertising Department
Sales Department
2.Determine the total cost allocated to advertising and sales using the step method.
Total Cost Allocated
Advertising Department
Sales Department
3.Determine the total cost allocated to advertising and sales using the reciprocal method. (Round your intermediate calculations to the nearest whole dollar and final answers to 2 decimal places.)
Total Cost Allocated
Advertising Department
Sales Department
