15-21 Direct and step-down allocation.

E-books, an online book retailer, has two operating departmentscorporate sales and consumer salesand two support departmentshuman 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:

15-22 (30 min.) Reciprocal cost allocation (continuation of 15-21). ***PLEASE ANSWER ONLY THIS ONE***

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. List the two equations of the reciprocal method (i.e., reciprocal equations). No need to solve the equations.

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