E-books, an online book retailer, has two operating departments, Corporate Sales and Consumer Sales and two...

 

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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 are available for the year: Support Departments Operating Departments Human Resources Information Corporate Sales Systems $72,700 $234,400 $998,270 21 42 Consumer Sales $489,860 28 Budgeted Costs Budgeted number 0 of employees Budgeted 320 0 1,920 1,600 processing time (in minutes) E-books currently uses the direct method to allocate support departments costs. However, management is aware that the reciprocal methods is more defensible. They have hired you to help them out. Which method (direct, step-down, or reciprocal)? do you recommend? Why? 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 are available for the year: Support Departments Operating Departments Human Resources Information Corporate Sales Systems $72,700 $234,400 $998,270 21 42 Consumer Sales $489,860 28 Budgeted Costs Budgeted number 0 of employees Budgeted 320 0 1,920 1,600 processing time (in minutes) E-books currently uses the direct method to allocate support departments costs. However, management is aware that the reciprocal methods is more defensible. They have hired you to help them out. Which method (direct, step-down, or reciprocal)? do you recommend? Why?