Question: E books an online book retailer has two operating divisions Corporate Sales

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:
1. Allocate the support divisions’ costs to the operating divisions using the direct method.
2. Rank the support divisions based on the percentage of their services provided to other support divisions. Use this ranking to allocate the support divisions’ costs to the operating divisions based on the step-down method.
3. How could you have ranked the support divisions differently?

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  • CreatedJuly 31, 2015
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