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1. 2. Allocate the two support departments costs to the two operating departments using the reciprocal method. Use (a) linear equation and (b) repeated iterations. Compare and explain differences in requirement 1 with those of the direct method and the step down method. Which method do you prefer? Why? Print Done Budgeted overhead costs before any Interdepartment cost allocations Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted computer time) $ AS SUPPORT 0 IS 10% 25% OPERATING 600,000 $2,400,000 $8,756,000 $ 12,452,000 $ 24,208,000 0 GOVT 40% CORP 30% 35% Total 60% 100% 100% a 20 Direct method Direct Method Budgeted overhead costs. before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments Ibudgeted overhead of operating departments $ $ Support Departments AS Print OS IS 600,000 $2,400,000 $8,756,000 $ 12,452,000 $ 24,208,000 (600,000) 320,000 280,000 800,000 1,600,000 0$ 9,876,000 $ 14,332,000 $ 24,208,000 (2,400,000) Done Operating Departments GOVT CORP Total I govemment consult Step-down method (AS first) Step-down Method Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments $ $ Support Departments AS Print 600,000 $2,400,000 $8,756,000 $ (600,000) 150,000 240,000 0 $ IS 2,550,000 (2,550,000) Done Operating Departments GOVT CORP Total 12,452,000 $ 24,208,000 210,000 850,000 1,700,000 0$ 9,846,000 $14,362,000 $ 24,208,000 Step-down method (IS first) Step-down Method Budgeted overhead costs before interdepartment cost allocations Allocation of IS costs Allocation of AS costs Total budgeted overhead of operating departments $ $ $ ME EN Oums. Support Departments AS 840,000 (840,000) 600,000 $2,400,000 $8,756,000 $ 240,000 (2,400,000) 720,000 0 S IS Print Done Operating Departments GOVT CORP 0 448,000 $ 9,924,000 $ Total 12,452,000 $ 24,208,000 1,440,000 392,000 14,284,000 $ 24,208,000 nt ns ng oc Reference Direct method Step-down (AS first) Step-down (IS first) $ Print GOVT 1,120,000 $ 1,090,000 1,168,000 Done CORP 1,880,000 1,910,000 1,832,000 - X hod hree 9 de hese lo Now allocate the support departments costs (AS and IS department costs that you determined in the prior step) to the two operating departments using the reciprocal method. (Round decimal calculations to three decimal places, XXX, and your final answers to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs. Enter a 0 for any zero balances.) Support Departments AS Reciprocal Method Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments 600000 IS 2400000 Operating Departments GOVT CORP 8756000 12452000 Total 24208000