O -books, an online book retailer, has two operating departments-corporate sales

Question

O -books, an online book retailer, has two operating departments-corporate sales and consumer sales-and two support departments-human resources and information systems. 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 following data are available for September 2013 EE (Click the icon to view the data.) Read the requirements. Requirement 1.Allocate the support departments' costs to the operating departments using the direct method. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances. Abbreviations used: HR Human resources; Info. Information.) Support Departments HR Info. Systems Corporate Consumer Total Operating Departments Costs incurred Allocation of HR costs Allocation of Info. System costs Total budgeted costs of operating departments

Explanation / Answer

Solution 1:

Solution 2:

Solution 3:

Support department can be ranked in order of % of support provided to other support department in lower to higher or higher to lower manner.

Particulars Service Department Cost Allocation - Direct Method Service Department Operating Departments Total Human Resource Information System Corporate Sales Consumer Sales Cost Incurred $20,000 $220,000 $970,000 $470,000 $1,680,000 Allocation of HR cost (49:21) -$20,000 $14,000 $6,000 Allocation of Information System cost (2000:1640) -$220,000 $120,879 $99,121 Total $0 $0 $1,104,879 $575,121 $1,680,000

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