Consider E-books again. The controller of E-books reads a widely used textbook that states that the reciprocal

Question:

Consider E-books again. The controller of E-books reads a widely used textbook that states that “the reciprocal method is conceptually the most defensible.” He seeks your assistance.

Required:
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?

Data From Exercise 15-21:

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 September 2013:

1 Home Insert. Page Layout A 2 4 3 Budgeted costs incurred before any interdepartment cost allocations

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133428704

15th edition

Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan

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