O-books, an online book retailer, has two operating departments-corporate sales and consumer sales-and two support departments-human...

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O-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.) The following data are available for September 2020: (Click the icon to view the data.) (Click the icon to view the direct allocation data ) More info - Requirements Step-down allocation data Each sales department conducts merchandising and marketing operations independently. O - books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of O - books reads a widely used textbook that states that "the reciprocal method is conceptually the most defensible." He seeks your assistance. 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? Costs incurred Allocation of HR costs Data table 1 Drint Dono A B SUPPORT $ DEPARTMENTS Human Resources D OPERATING DEPARTMENTS Information Systems Corporate Sales Consumer Sales 90,000 $ 227,000 $ 995,000 $ 484,000 2 Budgeted costs incurred before any 3 interdepartment cost allocations Support work supplied by human 4 resources department 5 Budgeted number of employees Support work supplied by information 0 20 48 32 6 systems department 7 Budgeted processing time (in minutes) 400 0 2,160 1,440 Print Done Print Done Allocation of Info. Systems costs Support Departments Operating Departments HR $ Info. Systems 90,000 $ Corporate Consumer Total 227,000 $ 995,000 $ 484,000 $ 1,796,000 (90,000) 18,000 43,200 28,800 $ 0 245,000 (245,000) 147,000 98,000 $ 0 $ 1,185,200 $ 610,800 $ 1,796,000 Total budgeted costs of operating departments *Proportions for services provided to other support departments: human resources (HR), 0.20000; information sytems (IS), 0.10000. Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Print Done Support Departments Operating Departments HR $ Info. Systems Corporate 90,000 $ 227,000 $ (90,000) Consumer Total 995,000 $ 484,000 $ 1,796,000 54,000 36,000 (227,000) 136,200 90,800 $ 0 $ 0 $ 1,185,200 $ 610,800 $ 1,796,000 Print Done Requirement 1. Describe the key features of the reciprocal method. The reciprocal allocation method explicitly includes the mutual services provided among all support departments . Interdepartmental relationships are fully incorporated into the support department cost allocations. Requirement 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. Before we can allocate the support departments' costs to the two operating departments using the reciprocal method, let's first determine the linear equations for each support department. Then off-line solve for HR and IS (Information Systems), so that you may complete the allocation of the support departments' costs. (Abbreviations used: HR = human resources; IS = information system.) HR= $90,000 + 0.10000 IS IS= $227,000 + 0.20000 HR Now allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. (Round proportions to five decimal places, .XXXXX, and your final answers to the nearest Enter a "0" for zero balances.) Costs incurred Allocation of HR costs $ Support Deparments HR Info. Systems 4000000 $ Corporate Operating Departments Consumer 2220000000 $ $ Total 66/8000000$ $ $11.7000000 333100 22220 Allocation of Info. Systems costs $ 00000$ Total budgeted costs of operating departments 2739000 (23880000 000 $1350000000 $ This time, use repeated iterations. (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 Reciprocal Method HR Info. Systems Corporate Consumer Total Budgeted overhead costs before interdepartment cost allocations $ 00000$ 2220000 $ $ 48888888850 $$11000000000 wwwwwwww First allocation of HR costs 44300000000 22101000 First allocation of Info. Systems costs Second allocation of HR costs Second allocation of Info. Systems costs Third allocation of HR costs Third allocation of Info. Systems costs Fourth allocation of HR costs Fourth allocation of Info. Systems costs $ 0000$ Total budgeted overhead of operating departments 000 $$$$$70000 $5555660000 $333333350 O-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.) The following data are available for September 2020: (Click the icon to view the data.) (Click the icon to view the direct allocation data ) More info - Requirements Step-down allocation data Each sales department conducts merchandising and marketing operations independently. O - books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of O - books reads a widely used textbook that states that "the reciprocal method is conceptually the most defensible." He seeks your assistance. 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? Costs incurred Allocation of HR costs Data table 1 Drint Dono A B SUPPORT $ DEPARTMENTS Human Resources D OPERATING DEPARTMENTS Information Systems Corporate Sales Consumer Sales 90,000 $ 227,000 $ 995,000 $ 484,000 2 Budgeted costs incurred before any 3 interdepartment cost allocations Support work supplied by human 4 resources department 5 Budgeted number of employees Support work supplied by information 0 20 48 32 6 systems department 7 Budgeted processing time (in minutes) 400 0 2,160 1,440 Print Done Print Done Allocation of Info. Systems costs Support Departments Operating Departments HR $ Info. Systems 90,000 $ Corporate Consumer Total 227,000 $ 995,000 $ 484,000 $ 1,796,000 (90,000) 18,000 43,200 28,800 $ 0 245,000 (245,000) 147,000 98,000 $ 0 $ 1,185,200 $ 610,800 $ 1,796,000 Total budgeted costs of operating departments *Proportions for services provided to other support departments: human resources (HR), 0.20000; information sytems (IS), 0.10000. Costs incurred Allocation of HR costs Allocation of Info. Systems costs Total budgeted costs of operating departments Print Done Support Departments Operating Departments HR $ Info. Systems Corporate 90,000 $ 227,000 $ (90,000) Consumer Total 995,000 $ 484,000 $ 1,796,000 54,000 36,000 (227,000) 136,200 90,800 $ 0 $ 0 $ 1,185,200 $ 610,800 $ 1,796,000 Print Done Requirement 1. Describe the key features of the reciprocal method. The reciprocal allocation method explicitly includes the mutual services provided among all support departments . Interdepartmental relationships are fully incorporated into the support department cost allocations. Requirement 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. Before we can allocate the support departments' costs to the two operating departments using the reciprocal method, let's first determine the linear equations for each support department. Then off-line solve for HR and IS (Information Systems), so that you may complete the allocation of the support departments' costs. (Abbreviations used: HR = human resources; IS = information system.) HR= $90,000 + 0.10000 IS IS= $227,000 + 0.20000 HR Now allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. (Round proportions to five decimal places, .XXXXX, and your final answers to the nearest Enter a "0" for zero balances.) Costs incurred Allocation of HR costs $ Support Deparments HR Info. Systems 4000000 $ Corporate Operating Departments Consumer 2220000000 $ $ Total 66/8000000$ $ $11.7000000 333100 22220 Allocation of Info. Systems costs $ 00000$ Total budgeted costs of operating departments 2739000 (23880000 000 $1350000000 $ This time, use repeated iterations. (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 Reciprocal Method HR Info. Systems Corporate Consumer Total Budgeted overhead costs before interdepartment cost allocations $ 00000$ 2220000 $ $ 48888888850 $$11000000000 wwwwwwww First allocation of HR costs 44300000000 22101000 First allocation of Info. Systems costs Second allocation of HR costs Second allocation of Info. Systems costs Third allocation of HR costs Third allocation of Info. Systems costs Fourth allocation of HR costs Fourth allocation of Info. Systems costs $ 0000$ Total budgeted overhead of operating departments 000 $$$$$70000 $5555660000 $333333350

Answer rating: 100% (QA)

A classic allocation problem The reciprocal method is a way to allocate the costs of support departments to operating departments The key features of the reciprocal method are 1 Dual allocation The me... View the full answer