15-19 Support-department cost allocation; direct and step-down methods. Phoenix Pa rtners provides management consultin g servic es to g overnment a nd corpora te clients. Phoenix h a s two support departmentsadministrative services (AS) and information systems (IS)and two operating departments government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 201 2, Phoenixs cost records ind ica te the following:

			Support			Operating
			AS	IS		GOVT	CORP	total
Budgeted overhead costs before any interdepartment cost allocations
			$ 60,000	$2,400,000		$ 8,756,000	$ 12,452,000	$ 24,206,000
Support work supplied by AS (budgeted head count)
			-	25%		40%	35%	100%
Support work supplied by IS (budgeted computer time)
			10%	-		30%	60%	100%

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?

			Support			Operating
			AS	IS		GOVT	CORP	total
Budgeted overhead costs before any interdepartment cost allocations
			$ 60,000	$2,400,000		$ 8,756,000	$ 12,452,000	$ 24,206,000
Support work supplied by AS (budgeted head count)
			-	25%		40%	35%	100%
Support work supplied by IS (budgeted computer time)
			10%	-		30%	60%	100%