=+13-21 KK Direct and step-down allocation OBJECTIVE 3 Books Galore, 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. Books Galore uses number of employees to allocate Human Resources costs and processing time to allocate Information Systems costs. The following data are available for September 2014:

Chapter 13: Allocation of support-department costs, common costs and revenues 531 M13_HORN3377_02_LT_C13.indd 531 2/09/13 3:53 PM 1

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8 A B EDC F Human Resources Information Systems Corporate Sales Consumer Sales Budgeted costs incurred before any interdepartment cost allocations $72 700 Support work supplied by Human Resources Department Budgeted number of employees 42 28 Support work supplied by Information Systems Department Budgeted processing time (in minutes) 1 920 1 600 Support departments Operating departments 320

$234 400 $998 270 $489 860

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Required 1 Allocate the support departments’ costs to the operating departments using the direct method.