Atlanta Partners provides management consulting services to government and corporate clients. Atlanta has two support departments—administrative services (AS) and information systems (IS)—and two operating departments—government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Atlanta's cost records indicate the following: Read the requirements2. Requirement 1a. Allocate the two support departments' costs to the two operating departments using the direct method. (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Direct Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments Requirement 1b. Allocate the two support departments' costs to the two operating departments using the step-down method (Allocate AS first). (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Step-down Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations (1) (2) Total budgeted overhead of operating departments Requirement 1c. Allocate the two support departments' costs to the two operating departments using the step-down method (Allocate IS first). (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Step-down Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations (3) (4) Total budgeted overhead of operating departments Requirement 2. Compare and explain differences in the support-department costs allocated to each operating department. Begin by entering the total support-department costs allocated to each operating department under each of the methods below. GOVT CORP Direct method Step-down (AS first) Step-down (IS first) The direct method (5) . The step-down method (6) . There is a disproportionate usage of IS services by CORP. Therefore when AS costs are allocated first it results in (7) to CORP. Similarly, GOVT.'s usage of the AS group exceeds CORP's. Therefore, when AS costs are allocated second it results in (8) to GOVT. Requirement 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? (If a box is not used in the table, leave the box empty; do not select a label.) The approaches that could determine the sequence in the step-down method are: (9) (10) (11) (12) 1: Data Table SUPPORT OPERATING AS IS GOVT CORP Total Budgeted overhead costs before any interdepartment cost allocations $630,000 $3,000,000 $8,675,000 $12,450,000 $24,755,000 Support work supplied by AS (budgeted head count) 0 20% 48% 32% 100% Support work supplied by IS (budgeted computer time) 10% 0 36% 54% 100% 2: Requirements 1. Allocate the two support departments' costs to the two operating departments using the following methods: a. Direct method b. Step-down method (Allocate AS first) c. Step-down method (Allocate IS first)

Atlanta Partners provides management consulting services to government and corporate clients. Atlanta has two support departments—administrative services (AS) and information systems (IS)—and two operating departments—government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Atlanta's cost records indicate the following: Read the requirements2. Requirement 1a. Allocate the two support departments' costs to the two operating departments using the direct method. (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Direct Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments Requirement 1b. Allocate the two support departments' costs to the two operating departments using the step-down method (Allocate AS first). (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Step-down Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations (1) (2) Total budgeted overhead of operating departments Requirement 1c. Allocate the two support departments' costs to the two operating departments using the step-down method (Allocate IS first). (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.) Support Departments Operating Departments Step-down Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations (3) (4) Total budgeted overhead of operating departments Requirement 2. Compare and explain differences in the support-department costs allocated to each operating department. Begin by entering the total support-department costs allocated to each operating department under each of the methods below. GOVT CORP Direct method Step-down (AS first) Step-down (IS first) The direct method (5) . The step-down method (6) . There is a disproportionate usage of IS services by CORP. Therefore when AS costs are allocated first it results in (7) to CORP. Similarly, GOVT.'s usage of the AS group exceeds CORP's. Therefore, when AS costs are allocated second it results in (8) to GOVT. Requirement 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? (If a box is not used in the table, leave the box empty; do not select a label.) The approaches that could determine the sequence in the step-down method are: (9) (10) (11) (12) 1: Data Table SUPPORT OPERATING AS IS GOVT CORP Total Budgeted overhead costs before any interdepartment cost allocations $630,000 $3,000,000 $8,675,000 $12,450,000 $24,755,000 Support work supplied by AS (budgeted head count) 0 20% 48% 32% 100% Support work supplied by IS (budgeted computer time) 10% 0 36% 54% 100% 2: Requirements 1. Allocate the two support departments' costs to the two operating departments using the following methods: a. Direct method b. Step-down method (Allocate AS first) c. Step-down method (Allocate IS first)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Atlanta Partners provides management consulting services to government and corporate clients. Atlanta has two support departments—administrative services (AS) and information systems (IS)—and

two operating departments—government consulting (GOVT) and corporate consulting (CORP). For the first quarter of

2017, Atlanta's cost records indicate the following:

Read the requirements2.

Requirement 1a. Allocate the two support departments' costs to the two operating departments using the direct method. (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.)

	Support Departments	Operating Departments
Direct Method	AS	IS	GOVT	CORP	Total
Budgeted overhead costs
before interdepartment cost allocations
Allocation of AS costs
Allocation of IS costs
Total budgeted overhead of operating departments

Requirement 1b. Allocate the two support departments' costs to the two operating departments using the step-down method (Allocate AS first). (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.)

	Support Departments	Operating Departments
Step-down Method	AS	IS	GOVT	CORP	Total
Budgeted overhead costs
before interdepartment cost allocations
(1)

(2)
Total budgeted overhead of operating departments

Requirement 1c. Allocate the two support departments' costs to the two operating departments using the step-down method (Allocate IS first). (Do not round intermediary calculations and round your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a "0" for any zero balances.)

	Support Departments	Operating Departments
Step-down Method	AS	IS	GOVT	CORP	Total
Budgeted overhead costs
before interdepartment cost allocations
(3)

(4)
Total budgeted overhead of operating departments

Requirement 2. Compare and explain differences in the support-department costs allocated to each operating department.

Begin by entering the total support-department costs allocated to each operating department under each of the methods below.

	GOVT	CORP
Direct method
Step-down (AS first)
Step-down (IS first)

The direct method (5) . The step-down method (6)

There is a disproportionate usage of IS services by CORP. Therefore when AS costs are allocated first it results in (7)

to CORP. Similarly, GOVT.'s usage of the AS group exceeds CORP's. Therefore, when AS costs are allocated second it results in

(8) to GOVT.

Requirement 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? (If a box is not used in the table, leave the box empty; do not select a label.)

The approaches that could determine the sequence in the step-down method are:

(9)

(10)

(11)

(12)

1: Data Table

	SUPPORT	OPERATING
	AS	IS	GOVT	CORP	Total
Budgeted overhead costs before any interdepartment cost allocations	$630,000	$3,000,000	$8,675,000	$12,450,000	$24,755,000
Support work supplied by AS (budgeted head count)	0	20%	48%	32%	100%
Support work supplied by IS (budgeted computer time)	10%	0	36%	54%	100%

2: Requirements

1.	Allocate the two support departments' costs to the two operating departments using the following methods:
	a.	Direct method
b.	Step-down method (Allocate AS first)
c.	Step-down method (Allocate IS first)
2.	Compare and explain differences in the support-department costs allocated to each operating department.
3.	What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method?

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