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,...

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 company uses number of employees as a basis to allocate administrative costs and processing time as a basis to allocate information systems costs.

REQUIRED: (i) 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.