15-19 Support-department cost allocation; direct and step-down methods.

Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departmentsadministrative services (AS) and information systems (IS)and two operating departmentsgovernment consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Phoenixs cost records indicate the following:

Support Operating

AS IS GOVT CORP Total

Budgeted overhead costs before any

interdepartmental cost allocations $600,000 $2,400,000 $8,756,000 $12,452,000 $24,208,000

Support work supplied 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)

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