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 2020:

Required

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. How could you have ranked the support departments differently?

Transcribed Image Text:

1 2 3 4 5 6 Home Insert A Page Layout Budgeted costs incurred before any interdepartment cost allocations Support work supplied by human resources department Budgeted number of employees Support work supplied by information 7 systems department 8 Budgeted processing time (in minutes) Formulas B Data Review C SUPPORT DEPARTMENTS 320 Human Information Resources Systems $72,700 $234,400 21 View E OPERATING DEPARTMENTS F Corporate Consumer Sales Sales $998,270 $489,860 42 1,920 28 1,600