Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions