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y48 400 P. 10.8 E-books is an online book retailer. The company has four departments. The two sales departments are corporate sales and consumer sales.
y48 400 P. 10.8 E-books is an online book retailer. The company has four departments. The two sales departments are corporate sales and consumer sales. The two support departments are Administrative (Human resources, Accounting), and Information systems. Each of the sales departments conducts merchandising and marketing operations independently. The following data are available for October, 2013: Departments Revenues Number of employees Processing time used (in minutes) Corporate sales 16,67,750 42 2,400 Consumer sales 8,33,875 28 2,000 Administrative 14 Information systems 21 1,400 Cost incurred in each of four departments for October, 2013 are as follows: Corporate sales 312,97 751 Consumer sales 6,36,818 Administrative 94,510 (Information systems) 3,04.720 The company uses number of employees as a basis to allocate administrative costs and processing time as a basis to allocate information systems costs. REQUIRED: (1) Allocate the support department costs to the sales departments using the direct method. (ii) Rank the support departments based on percentage of their services rendered to other support departments. Use this ranking to allocate support costs based on the step-down allocation method. (iii) How could you have ranked the support departments differently? (iv) Allocate the support department costs to two sales departments using the reciprocal allocation method
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