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.
Support Departments Operating Departments
Information Technology Operations Claims Processing Administration Sales
Information technology — 20% 20% 40% 20%
Operations 10% — 10 50 30
The total costs incurred in the five departments are:
Information technology $ 560,000
Operations 1,730,000
Claims processing 250,000
Administration 599,000
Sales 650,000
Total costs $ 3,789,000
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.)
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