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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
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 resouroes costs and processing time to allocate information systems costs. The following data are available for September 2017: (Click the icon to view the data.) Read the requirements Requirement 1. Allocate the support departments' costs to the operating departments using the direct method. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0 for any zero balances. Abbreviations used: HR Human resources; Info. Information.) Support Departments Operating Departments HR Info. Systems Corporate 998270 Consumer Total Costs incurred 72700 234400 489860 1795230 Allocation of HR costs -72700 43620 29080 Allocation of Info. System costs -234400 127855 106545 1169745 625485 Total budgeted costs of operating departments 1795230 Requirement 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 First, rank, from highest to lowest, the support departments based on the percentage of their services provided to other support departments. (Round percentages to five decimal places.) Support department Percentage Human Resources 23% Information Systems 5% Next, use this ranking to allocate the support departments' oosts to the operating departments based on the step-down method. (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a 0" for any zero balances.) Support Departments Operating Departments HR Info. Systems Corporate Consumer Total 72700 Costs incurred (72700) Allocation of HR costs Allocation of Info. System costs Total budgeted costs of operating departments Requirement 3. How could you have ranked the support departments differently? You can rank E-books' support departments using an altemative approach-ranking based on the Using the step-down method, this approach would result in the following sequence: Step 1 Step 2 Data Table - X Support Departments Operating Departments Human Information Corporate Consumer Resources Systems Sales Sales Budgeted costs incurred before any interdepartment cost allocations 72,700 $ 234,400 $ 998,270 $ 489,860 Support work supplied by human resources department Budgeted number of employees 42 Support work supplied by information systems department Budgeted processing time (in minutes) 320 1,920 1,600 Print Done 28 21
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