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Describe the key features of the reciprocal method.

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.

In the case presented in this exercise, which method $($direct$,$ step$-$down,

or reciprocal$)$ would you recommend? Why?

More info

Each sales department conducts merchandising and marketing operations

independently. E$-$books uses number of employees to allocate human resource

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.

Step$-$down allocation data

Done

Data table

Direct allocation dataRequirement $2.$ Allocate the support departments' costs $($human resources and information systems$)$ to the two operating departments using the reciprocal method.

human resources; IS $=$ information system.$)$

$HR=$

$+$

$IS=$

zero balances.$)$

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

Recommendation: The

because it is more accurate than the other two methods when there are mutual relationships among support departments.

Why would you recommend this method?

A$.$ It is easy to compute and understand, and being precise is not necessary.

B$.$ It ranks support departments in the order that the allocation is to proceed and partially recognizes the mutual services provided.

: It fully incorporates interdepartmental relationships into the support departments cost allocation.