Question

Consider E-books again. The controller of E-books reads a widely used textbook that states “the reciprocal method is conceptually the most defensible.” He seeks your assistance.
In exercise
E-books, an online book retailer, has two operating divisions—Corporate Sales and Consumer Sales—and two support divisions—Human Resources and Information Systems. Each sales division conducts merchandising and marketing operations independently. E-books uses number of employees to allocate Human Resources costs and processing time to allocate Information Systems costs. The following data are available for September 2014:
REQUIRED
1. Describe the key features of the reciprocal method.
2. Allocate the support divisions’ costs (Human Resources and Information Systems) to the two operating divisions using the reciprocal method.
3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why?


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  • CreatedJuly 31, 2015
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