E-books, an online book retailer, has two operating departments-corporate sales and consumer sales and two support departments-human resources and information systems. i (Click the icon to view additional information.) Requirement 1. Describe the key features of the reciprocal method. The reciprocal allocation method explicitly includes the mutual services provided cost allocations. ---- The following data are available for September 2017: (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. Interdepartmental relationships fully incorporated into the support department More info 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 controller of E-books reads a widely used textbook that states that "the reciprocal method is conceptually the most defensible." He seeks your assistance. Data table Budgeted costs incurred before any interdepartment cost allocations Support work supplied by human resources department Budgeted number of employees Support work supplied by information systems department Support Departments Human Resources $ Operating Departments Information Corporate Systems Sales Consumer Sales 90,000 $ 227,000 $ 994,000 $ 486,000 Budgeted processing time (in minutes) 400 20 20 44 36 2,520 1,080 Direct allocation data Costs incurred Allocation of HR costs Allocation of Info. Systems costs Support Departments Operating Departments HR Info. Systems Corporate Consumer Total $ 90,000 $ 227,000 $ 994,000 $ 486,000 $ 1,797,000 (90,000) (227,000) 49,500 158,900 40,500 68,100 EA 0 $ 0 $ 1,202,400 $ 594,600 $ 1,797,000 $ Total budgeted costs of operating departments Step-down allocation data Costs incurred Allocation of HR costs Support Departments Operating Departments HR Info. Systems Corporate Consumer Total $ 90,000 $ 227,000 $ 994,000 $ 486,000 $ 1,797,000 (90,000) 18,000 39,600 32,400 0 245,000 (245,000) $ 171,500 0 $ 1,205,100 $ 73,500 591,900 $ 1,797,000 Allocation of Info. Systems costs Total budgeted costs of operating departments *Proportions for services provided to other support departments: human resources (HR), 0.20000; information sytems (IS), 0.10000. 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? Gavin Gibbons, a self-employed consultant near Atlanta, received an invitation to visit a prospective client in Seattle. A few days later, he received an invitation to make a presentation to a prospective client in Denver. He decided to combine his visits, traveling from Atlanta to Seattle, Seattle to Denver, and Denver to Atlanta. Gibbons received offers for his consulting services from both companies. Upon his return, he decided to accept the engagement in Denver. He is puzzled over how to allocate his travel costs between the two clients. He has collected the following data for regular round-trip fares with no stopovers: (Click icon to view round-trip data.) (Click the icon to view additional data.) Read the requirements. Requirement 1 a. How should Gibbons allocate the $1,300 airfare between the clients in Seattle and Denver using the stand-alone cost-allocation method? (Hold all decimals in intermediary calculations. Round your final answers to the nearest dollar.) Stand-alone Seattle Denver Data table Atlanta to Seattle Atlanta to Denver 900 $ 600 More info Gibbons paid $1,300 for his three-leg flight (Atlanta-Seattle, Seattle-Denver, Denver-Atlanta). In addition, he paid $55 each way ($110 total) for limousines from his home to Atlanta Airport and back when he returned. Requirements 1. How should Gibbons allocate the $1,300 airfare between the clients in Seattle and Denver using (a) the stand-alone cost-allocation method, (b) the incremental cost-allocation method, and (c) the Shapley value method? 2. Which method would you recommend Gibbons use and why? 3. How should Gibbons allocate the $110 limousine charges between the clients in Seattle and Denver