Question One:

15-21 Direct and step-down allocation. E-books, an online book retailer, has two operating departments, corporate sales and consumer salesand two support departmentshuman 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 September 2013: Home Insert Page Layout Formulas Data Review View A B D E F SUPPORT OPERATING 1 DEPARTMENTS DEPARTMENTS Human Information Corporate Consumer 2 Resources Systems Sales Sales 3 Budgeted costs incurred before any interdepartment cost allocations $72,700 $234,400 $998,270 $489,860 Support work supplied by human 5 resources department 6 Budgeted number of employees 21 42 28 Support work supplied by information 7 systems department 8 Budgeted processing time in minutes) 320 1,920 1,600 4 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. Allocate the support department's costs using reciprocal method (Repeated Iteration 4. Allocate the support department's costs using reciprocal method (Linear Equation)