Ibooks, 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.

Ibooks uses number of employees to allocate human resources costs and processing time to allocate information

	Support Departments			Operating Departments
	Human	Information		Corporate	Consumer
	Resources	Systems		Sales	Sales
Budgeted costs incurred before any
interdepartment cost allocations	$90,000	$227,000		$980,000	$465,000
Support work supplied by human
resources department
Budgeted number of employees	-	20		48	32
Support work supplied by information
systems department
Budgeted processing time (in minutes)	400	-		2,160	1,440

	Support Departments		Operating Departments
	HR	Info. Systems	Corporate	Consumer	Total
Costs incurred	$90,000	$227,000	$980,000	$465,000	$1,762,000
Allocation of HR costs	-90,000		54,000	36,000
Allocation of Info. Systems costs		-227,000	136,200	90,800
Total budgeted costs of operating departments	$0	$0	$1,170,200	$591,800	$1,762,000

	Support Departments		Operating Departments
	HR	Info. Systems	Corporate	Consumer	Total
Costs incurred	$90,000	$227,000	$980,000	$465,000	$1,762,000
Allocation of HR costs	-90,000	18,000	43,200	28,800
	$0	245,000
Allocation of Info. Systems costs		-245,000	147,000	98,000
Total budgeted costs of operating departments		$0	$1,170,200	$591,800	$1,762,000

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.
3.	In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why?