Homework Answers
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| HomeLife Insurance | ||||||
| Answer 1- Direct Method | Actuarial | Premium | Advertising | Sales | Total | |
| Actuarial | 80.00% | 10.00% | 10.00% | 100.00% | ||
| Actuarial % | 50.0% | 50.0% | Service % to Premium will not be considered here. | |||
| Premium | 25.00% | 15.00% | 60.00% | 100.00% | ||
| Premium % | 20.0% | 80.0% | Service % to Actuarial will not be considered here. | |||
| Department cost | 87,000.00 | 22,000.00 | 67,000.00 | 47,000.00 | 223,000.00 | |
| Allocation | ||||||
| Actuarial | (87,000.00) | 43,500.00 | 43,500.00 | - | ||
| Premium | (22,000.00) | 4,400.00 | 17,600.00 | - | ||
| Total cost after allocation | - | - | 114,900.00 | 108,100.00 | 223,000.00 | |
| Answer 2- Step Method | Actuarial | Premium | Advertising | Sales | Total | Actuarial department provides more service so it should be allocated first. |
| Actuarial | 80.00% | 10.00% | 10.00% | 100.00% | ||
| Actuarial % | 80.0% | 10.0% | 10.0% | Service % to Premium will be considered here. | ||
| Premium | 25.00% | 15.00% | 60.00% | 100.00% | ||
| Premium % | 20.0% | 80.0% | Service % to Actuarial will not be considered here. | |||
| Department cost | 87,000.00 | 22,000.00 | 67,000.00 | 47,000.00 | 223,000.00 | |
| Allocation | ||||||
| Actuarial | (87,000.00) | 69,600.00 | 8,700.00 | 8,700.00 | - | |
| Total | - | 91,600.00 | 75,700.00 | 55,700.00 | 223,000.00 | |
| Premium | (91,600.00) | 18,320.00 | 73,280.00 | - | ||
| Total cost after allocation | - | - | 94,020.00 | 128,980.00 | 223,000.00 |
| Answer 3- Reciprocal Method | Actuarial | Premium | Advertising | Sales | Total |
| Actuarial | 80.00% | 10.00% | 10.00% | 100.00% | |
| Premium | 25.00% | 15.00% | 60.00% | 100.00% | |
| Department cost | 87,000.00 | 22,000.00 | 67,000.00 | 47,000.00 | 223,000.00 |
| Let Overhead cost of Actuarial department is $ X and Overhead cost of Premium Department is $ Y |
| So, X= 87000+ 25% of Y | Equation 1 |
| Y= 22000+ 80% of X | Equation 2 |
| Or, X= 87000+ 0.25Y | |
| Y= 22000+ 0.80X | |
| Substituting the value of X in equation 2: | |
| Y = 22000 + 0.80(87,000 + 0.25Y) | |
| Y = 22000 + 69,600+.020Y | |
| Y – 0.20Y = 91,600 | |
| 0.80Y = 91,600 | |
| Y = 91600/.80 | |
| Y = $ 114,500 | |
| Substituting the value of Y in equation 1: | |
| So, X= 87000+ 25% of Y | |
| So, X= 87000+ 25% of 114,500 | |
| So, X= 87000+ 28,625 | |
| X= $ 115,625 |
| Allocation Summary | Actuarial | Premium | Advertising | Sales | Total |
| Actuarial | 80.0% | 10.0% | 10.0% | ||
| Premium | 25.00% | 15.00% | 60.00% | 100.00% | |
| Department cost | 87,000.00 | 22,000.00 | 67,000.00 | 47,000.00 | 223,000.00 |
| Allocation | |||||
| Actuarial | (115,625.00) | 92,500.00 | 11,562.50 | 11,562.50 | - |
| Premium | 28,625.00 | (114,500.00) | 17,175.00 | 68,700.00 | - |
| Total cost after allocation | - | - | 95,737.50 | 127,262.50 | 223,000.00 |
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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...
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 % 15 % 5 % Premium 25 % — 15 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 87,000 Premium rating 22,000 Advertising...
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:ToFromActuarialPremium RatingAdvertisingSalesActuarial-80%10%10%Premium20%-2060The direct operating costs of the departments (including both variable and fixed costs) are:Actuarial$89,000Premium rating24,000Advertising69,000Sales49,000Required: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...
WU HomeLife Life Insurance Company has two service departments (actuarial and premium rating) and two production...
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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 $ 99,000 Premium rating 34,000 Advertising...
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 20 % — 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 92,000 Premium rating 27,000 Advertising...
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: From Actuarial Premium To Actuarial Premium Rating Advertising 80 % 15% 25 % 15 Sales 5% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $ 84,000 19,000 64,000 44,000 Required:...
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: From Actuarial Premium To Actuarial Premium Rating Advertising 80 % 15% 25 % 15 Sales 5% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $84,000 19,000 64,000 44,000 Required: 1....
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 20 % — 20 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial $ 92,000 Premium rating 27,000 Advertising...
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: Premiumm ng Sales rom Actuarial- Premium 20% - 75% 10% 20 15% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales S88,000 23,000 68,000 48,000 Required 1. Determine the totail cost...
Exercise 7-28 Departmental Cost Allocation (LO 7-3, 7-5] HomeLife Life Insurance Company has two service departments...
Exercise 7-28 Departmental Cost Allocation (LO 7-3, 7-5] 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 From Actuarial Premium To Premium Rating 80 % Advertising Sales 10% 10% 1560 25 % The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising...
WU 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 Actuarial To Premium Rating sek Advertising 10% Sales 10% Actuarial Premium 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $80,000 15,000 60,000 40,000 Required: 1. Determine the total...
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 Actuarial Premium To Actuarial Premium Rating Advertising 80 % 15% 25 % 15 Sales 5% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $ 84,000 19,000 64,000 44,000 Required:...
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 Actuarial Premium To Actuarial Premium Rating Advertising 80 % 15% 25 % 15 Sales 5% 60 The direct operating costs of the departments (including both variable and fixed costs) are: Actuarial Premium rating Advertising Sales $84,000 19,000 64,000 44,000 Required: 1....
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