Determine the total cost allocated to the advertising

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Question - 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

To

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

$96.000

Premium rating

31,000

Advertising

76,000

Sales

56,000

Required:

1. Determine the total cost allocated to the advertising and sales departments using the direct method.

2. Determine the total cost allocated to advertising and sales using the step method.

3. Determine the total cost allocated to advertising and sales using the reciprocal method.

Reference no: EM131727233

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