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 departments government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2013, Phoenixs cost records indicate the following:

Please show work neatly

	AS	IS		GOVT	CORP	TOTAL
Budgeted overhead cost before any interdepartmental cost allocations	$600,000	$2,400,000		$8,756,000	$12,452,000	$24,208,000
Supported work supplied by AS (budgeted head count)		25%		40%	35%	100%
Supported 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?