Question
Vision Books,an online book retailer, has two operating departmentscorporate sales and consumer salesand two support departmentshuman resources and information systems. Each sales department conducts merchandising
Vision Books,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.Vision Books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of Vision Books reads a widely used textbook that states that "the reciprocal method is conceptually the most defensible." He seeks your assistance. The following data are available for September 2012:
Support Departments | Operating Departments | ||||
Human | Information | Corporate | Consumer | ||
Resources | Systems | Sales | Sales | ||
Budgeted costs incurred during any | |||||
interdepartment cost allocations | $70,000 | $238,000 | $996,000 | $489,000 | |
Support work supplied by human | |||||
resources department | |||||
Budgeted number of employees | 20 | 43 | 28 | ||
Support work supplied by information | |||||
systems department | |||||
Budgeted processing time (in minutes) | 370 | 1,870 | 1,500 |
Direct Allocation date | Support Deparments | Operating Departments | |||
HR | Info. Systems | Corporate | Consumer | Total | |
Costs incurred | $70,000 | $238,000 | $996,000 | $489,000 | $1,793,000 |
Allocation of HR costs | (70,000) | 42,394 | 27,606 | ||
Allocation of Info. Systems costs | (238,000) | 132,066 | 105,934 | ||
Total budgeted costs of operating departments | $0 | $0 | $1,170,460 | $622,540 | $1,793,000 |
step-down allocation data
Support Deparments | Operating Departments | ||||
HR | Info. Systems | Corporate | Consumer | Total | |
Costs incurred | $70,000 | $238,000 | $996,000 | $489,000 | $1,793,000 |
Allocation of HR costs | (70,000) | 15,385 | 33,077 | 21,538 | |
$0 | 253,385 | ||||
Allocation of Info. Systems costs | (253,385) | 140,603 | 112,782 | ||
Total budgeted costs of operating departments | $0 | $1,169,680 | $623,320 | $1,793,000 |
Requirement 1. 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.
HR= | + | |||
IS= | + |
Now allocatethe support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. (Round percentages to three decimal places, X.XXX%, and your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Complete all answer boxes.)
Support Deparments | Operating Departments | ||||
HR | Info. Systems | Corporate | Consumer | Total | |
Costs incurred | |||||
Allocation of HR costs | |||||
Allocation of Info. Systems costs | |||||
Total budgeted costs of operating departments |
*Proportions for services provided to other support departments: HR,
0.219780.21978;
IS,
0.098930.09893.
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