Bookstore.com, an online book retailer, has two operating departments: corporate sales and consumer sales. It also...

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Bookstore.com, an online book retailer, has two operating departments: corporate sales and consumer sales. It also has two support departments: human resources and information systems. Each sales department conducts merchandising and marketing operations independently. Bookstore.com uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of Bookstore.com reads a widely used textbook that states that the reciprocal method is conceptually the most defensible." He seeks your assistance. The following data are available for September 2012: Budgeted costs incurred during any interdepartment cost allocations Support work supplied by human resources department Budgeted number of employees Support work supplied by information systems department Budgeted processing time (in minutes) Support Departments Human Resources Information Systems 280 $ 90,000 $ 255,000 $ 995,000 $510,000 Operating Departments Corporate Consumer Sales Sales 20 48 1,750 32 1,470 Costs incurred Allocation of HR costs. Allocation of Info. Systems costs Total budgeted costs of operating departments $ $ Support Deparments Operating Departments HR Info. Systems Corporate Consumer Total 90,000 $ 255,000 $995,000 $ 510,000 $1,850,000 (90,000) 36,000 116,413 0 $1,187,587 $662,413 $ 1,850,000 54,000 (255,000) 138,587 Costs incurred Allocation of HR costs $ $ Support Deparments Operating Departments HR Info. Systems Corporate Consumer Total 90,000 $ 255,000 $995,000 $ 510,000 $1,850,000 (90,000) 18,000 43,200 28,800 0 273,000 (273,000) Allocation of Info. Systems costs Total budgeted costs of operating departments *Proportions for services provided to other support departments: HR, 0.20000; IS, 0.08000. 148,370 124,630 0 $1,186,570 $ 663,430 $1,850,000 $ Requirements 1. Describe the key features of the reciprocal method. 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? Requirement 1. Describe the key features of the reciprocal method. Which? all support departments The reciprocal allocation method explicitly includes the mutual services provided among the Human Resource deparment the Information Systems department are fully incorporated into the support department cost allocations. Interdepartmental relationships are not Requirement 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. Before we can allocate the support departments' costs to the two operating departments using the reciprocal method, let's first determine the linear equations for each support department. Then off-line solve for HR and IS (Information Systems), so that you may complete the allocation of the support departments' costs. HR= IS= Now allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. (Round percentages to three decimal places, X.XXX%, and your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Complete all answer boxes.) Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Support Deparments HR Info. Systems Operating Departments Corporate Consumer Total Requirement 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? direct method Recommendation: The departments. reciprocal method step-down method Why would you recommend this method? because it is more accurate than the other two methods when there are mutual relationships among support OA. It fully incorporates interdepartmental relationships into the support departments cost allocation. OB. It is easy to compute and understand, and being precise is not necessary. Oc. It ranks support departments in the order that the allocation is to proceed and partially recognizes the mutual services provided. Bookstore.com, an online book retailer, has two operating departments: corporate sales and consumer sales. It also has two support departments: human resources and information systems. Each sales department conducts merchandising and marketing operations independently. Bookstore.com uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of Bookstore.com reads a widely used textbook that states that the reciprocal method is conceptually the most defensible." He seeks your assistance. The following data are available for September 2012: Budgeted costs incurred during any interdepartment cost allocations Support work supplied by human resources department Budgeted number of employees Support work supplied by information systems department Budgeted processing time (in minutes) Support Departments Human Resources Information Systems 280 $ 90,000 $ 255,000 $ 995,000 $510,000 Operating Departments Corporate Consumer Sales Sales 20 48 1,750 32 1,470 Costs incurred Allocation of HR costs. Allocation of Info. Systems costs Total budgeted costs of operating departments $ $ Support Deparments Operating Departments HR Info. Systems Corporate Consumer Total 90,000 $ 255,000 $995,000 $ 510,000 $1,850,000 (90,000) 36,000 116,413 0 $1,187,587 $662,413 $ 1,850,000 54,000 (255,000) 138,587 Costs incurred Allocation of HR costs $ $ Support Deparments Operating Departments HR Info. Systems Corporate Consumer Total 90,000 $ 255,000 $995,000 $ 510,000 $1,850,000 (90,000) 18,000 43,200 28,800 0 273,000 (273,000) Allocation of Info. Systems costs Total budgeted costs of operating departments *Proportions for services provided to other support departments: HR, 0.20000; IS, 0.08000. 148,370 124,630 0 $1,186,570 $ 663,430 $1,850,000 $ Requirements 1. Describe the key features of the reciprocal method. 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? Requirement 1. Describe the key features of the reciprocal method. Which? all support departments The reciprocal allocation method explicitly includes the mutual services provided among the Human Resource deparment the Information Systems department are fully incorporated into the support department cost allocations. Interdepartmental relationships are not Requirement 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. Before we can allocate the support departments' costs to the two operating departments using the reciprocal method, let's first determine the linear equations for each support department. Then off-line solve for HR and IS (Information Systems), so that you may complete the allocation of the support departments' costs. HR= IS= Now allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. (Round percentages to three decimal places, X.XXX%, and your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Complete all answer boxes.) Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Support Deparments HR Info. Systems Operating Departments Corporate Consumer Total Requirement 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? direct method Recommendation: The departments. reciprocal method step-down method Why would you recommend this method? because it is more accurate than the other two methods when there are mutual relationships among support OA. It fully incorporates interdepartmental relationships into the support departments cost allocation. OB. It is easy to compute and understand, and being precise is not necessary. Oc. It ranks support departments in the order that the allocation is to proceed and partially recognizes the mutual services provided.

Answer rating: 100% (QA)

1 Proportions for services provided to other support departments Human resources 020000 and Informat... View the full answer