Reference no: EM132999255

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:

                 Actuarial           Premium Ratingn               Advertising              Sales
Actuarial            -                     70%                            15%                      15%
Premium          20%                     -                                 20                          60

The direct operating costs of the departments (including both variable and fixed costs) are:

Actuarial$ 93,000
Premium rating28,000
Advertising73,000
Sales53,000

Required:

Problem 1. Determine the total costs of the advertising and sales departments after using the direct method of allocation.

Problem 2. Determine the total costs of the advertising and sales departments after using the step method of allocation.

Problem 3. Determine the total costs of the advertising and sales departments after using the reciprocal method of allocation.