Support-department cost allocation; direct and step-down methods. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departments—administrative services (AS) and information systems (IS)—and two operating departments— government consulting (GOVT) and corporate consulting (CORP). For the rst quarter of 2017, Phoenix’s cost records indicate the following: HomeInsertPage LayoutFormulasDataReviewViewAвGSUPPORTOPERATINGASISGOVTCORPTotal3 Budgeted overhead costs before anyinterdepartment cost allocationsSupport work supplied by AS5 (budgeted head count)Support work supplied by IS6 (budgeted computer time)$600,000 $2,400,000$8,756,000 $12,452,000 $24,208,000425%40%35%100%10%30%60%100%1. Allocate the two support departments' costs to the two operating departments using the following methods:a. Direct methodRequiredb. 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 departmentswhen using the step-down method?

Answered: Home Insert Page Layout Formulas Data…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Support-department cost allocation; direct and step-down methods. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departments—administrative services (AS) and information systems (IS)—and two operating departments— government consulting (GOVT) and corporate consulting (CORP). For the rst quarter of 2017, Phoenix’s cost records indicate the following:

Home
Insert
Page Layout
Formulas
Data
Review
View
A
в
G
SUPPORT
OPERATING
AS
IS
GOVT
CORP
Total
3 Budgeted overhead costs before any
interdepartment cost allocations
Support work supplied by AS
5 (budgeted head count)
Support work supplied by IS
6 (budgeted computer time)
$600,000 $2,400,000
$8,756,000 $12,452,000 $24,208,000
4
25%
40%
35%
100%
10%
30%
60%
100%
1. Allocate the two support departments' costs to the two operating departments using the following methods:
a. Direct method
Required
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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