Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 8

Departmental Cost Allocation 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
The direct operating costs of the departments (including both variable and fixed costs) are
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.