Reciprocal cost allocation (continuation of 15-21). Consider E-books again. The controller of E-books reads a widely used textbook that states that “the reciprocal method is conceptually the most defensible.” He seeks your assistance.
1. Describe the key features of the reciprocal method.
2. Allocate the support departments’ costs (human resources and information systems) to the two operating departments using the reciprocal method.
3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why?
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