Vision Books, an online book retailer, has two operating departments-corporate sales and consumer sales-and two support...

Transcribed Image Text:

Vision Books, an online book retailer, has two operating departments-corporate sales and consumer sales-and two support departments-human resources and information systems. (Click the icon to view additional information.) The following data are available for September 2020: (Click the icon to view the data.) (Click the icon to view the direct allocation data.) (Click the icon to view the step-down allocation data.) Read the requirements. Requirement 1. Describe the key features of the reciprocal method. The reciprocal allocation method explicitly includes the mutual services provided fully incorporated into the support department cost allocations. Interdepartmental relationships More Info Each sales department conducts merchandising and marketing operations independently. Vision Books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of Vision Books reads a widely used textbook that states that "the reciprocal method is conceptually the most defensible." He seeks your assistance. Print Done - Data Table 1 2 A B Budgeted costs incurred before any 3 interdepartment cost allocations Support work supplied by human 4 resources department 5 Budgeted number of employees Support work supplied by information 6 systems department SUPPORT DEPARTMENTS D OPERATING E DEPARTMENTS - Human Information Corporate Consumer Resources Systems Sales Sales $ 90,000 $ 227,000 $ 993,000 $ 485,000 20 44 36 7 Budgeted processing time (in minutes) 400 0 2,520 1,080 Print Done Direct allocation data Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Support Departments Operating Departments HR Info. Systems Corporate Consumer Total 90,000 $ 227,000 $ 993,000 $ 485,000 $ 1,795,000 (90,000) (227,000) 49,500 158,900 40,500 68,100 0 $ 0 $ 1,201,400 $ 593,600 $1,795,000 Print Done - Step-down allocation data Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Support Departments Operating Departments Corporate Consumer Total 227,000 $ 993,000 $ 485,000 $ 1,795,000 HR Info. Systems $ 90,000 $ (90,000) $ 18,000 39,600 32,400 245,000 (245,000) 171,500 73,500 $ 0 $ 1,204,100 $ 590,900 $ 1,795,000 *Proportions for services provided to other support departments: human resources (HR), 0.20000; information sytems (IS), 0.10000. Print Done - 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. Use (a) linear equations and (b) repeated iterations. 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? Print Done - Vision Books, an online book retailer, has two operating departments-corporate sales and consumer sales-and two support departments-human resources and information systems. (Click the icon to view additional information.) The following data are available for September 2020: (Click the icon to view the data.) (Click the icon to view the direct allocation data.) (Click the icon to view the step-down allocation data.) Read the requirements. Requirement 1. Describe the key features of the reciprocal method. The reciprocal allocation method explicitly includes the mutual services provided fully incorporated into the support department cost allocations. Interdepartmental relationships More Info Each sales department conducts merchandising and marketing operations independently. Vision Books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of Vision Books reads a widely used textbook that states that "the reciprocal method is conceptually the most defensible." He seeks your assistance. Print Done - Data Table 1 2 A B Budgeted costs incurred before any 3 interdepartment cost allocations Support work supplied by human 4 resources department 5 Budgeted number of employees Support work supplied by information 6 systems department SUPPORT DEPARTMENTS D OPERATING E DEPARTMENTS - Human Information Corporate Consumer Resources Systems Sales Sales $ 90,000 $ 227,000 $ 993,000 $ 485,000 20 44 36 7 Budgeted processing time (in minutes) 400 0 2,520 1,080 Print Done Direct allocation data Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Support Departments Operating Departments HR Info. Systems Corporate Consumer Total 90,000 $ 227,000 $ 993,000 $ 485,000 $ 1,795,000 (90,000) (227,000) 49,500 158,900 40,500 68,100 0 $ 0 $ 1,201,400 $ 593,600 $1,795,000 Print Done - Step-down allocation data Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Support Departments Operating Departments Corporate Consumer Total 227,000 $ 993,000 $ 485,000 $ 1,795,000 HR Info. Systems $ 90,000 $ (90,000) $ 18,000 39,600 32,400 245,000 (245,000) 171,500 73,500 $ 0 $ 1,204,100 $ 590,900 $ 1,795,000 *Proportions for services provided to other support departments: human resources (HR), 0.20000; information sytems (IS), 0.10000. Print Done - 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. Use (a) linear equations and (b) repeated iterations. 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? Print Done -