Direct and step-down allocation E-books, an online book retailer, has two operating departmentsCorporate Sales and Consumer Salesand

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Direct and step-down allocation E-books, an online book retailer, has two operating departments—Corporate Sales and Consumer Sales—and two support departments—Human Resources and Information Systems. Each sales department 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 is available for September 2009:

SUPPORT DEPARTMENTS OPERATING DEPARTMENTS Human Information Corporate Consumer Resources Systems Sales Sales Budgeted co

1. Allocate the support departments’ costs to the operating departments using the direct method.

2. Rank the support departments based on the percentage of their services provided to other support departments. Use this ranking to allocate the support departments’ costs to the operating departments based on the step-down method.

3. How could you have ranked the support departments differently?

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Cost Accounting A Managerial Emphasis

ISBN: 978-0136126638

13th Edition

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

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