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HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production departments...

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 From Actuarial Premium 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 $ 94,000 Premium rating 29,000 Advertising 74,000 Sales 54,000 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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ekkarill92 answered 2 years ago
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