Support-department cost allocation; direct and step-down methods. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two sup- port 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, Phoenix's cost records indicate the following: Home Insert Page Layout Formulas Data Review View в SUPPORT AS OPERATING 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 25% 40% 35% 100% 10% 30% 60% 100%

Support-department cost allocation; direct and step-down methods. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two sup- port 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, Phoenix's cost records indicate the following: Home Insert Page Layout Formulas Data Review View в SUPPORT AS OPERATING 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 25% 40% 35% 100% 10% 30% 60% 100%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Allocate the two support departments’ costs to the two operating departments using the reciprocal method. Use (a) linear equations and (b) repeated iterations.

Support-department cost allocation; direct and step-down methods. Phoenix Partners
provides management consulting services to government and corporate clients. Phoenix has two sup-
port 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, Phoenix's cost records indicate the following:
Home
Insert
Page Layout
Formulas
Data
Review
View
в
SUPPORT
AS
OPERATING
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
25%
40%
35%
100%
10%
30%
60%
100%

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