Question 3 Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support 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: SUPPORT OPERATING AS IS GVT CORP TOTAL Budgeted overhead costs $600,000 $2,400,000 $8,756,000 $12,452,000 $24,208,000 before any inter-department cost allocations Support work supplied by 25% 40% 35% 100% AS (budgeted head count) Support work supplied by 10% IS (budgeted time) computer 30% 60% 100% Required: 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Question 3
Phoenix Partners provides management consulting services to government and
corporate clients. Phoenix has two support 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:
SUPPORT
OPERATING
AS
IS
GVT
CORP
TOTAL
Budgeted overhead costs $600,000
$2,400,000
$8,756,000
$12,452,000
$24,208,000
before any inter-department
cost allocations
Support work supplied by
25%
40%
35%
100%
AS (budgeted head count)
Support work supplied by 10%
IS
(budgeted
time)
computer
30%
60%
100%
Required:
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.
Transcribed Image Text:Question 3 Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support 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: SUPPORT OPERATING AS IS GVT CORP TOTAL Budgeted overhead costs $600,000 $2,400,000 $8,756,000 $12,452,000 $24,208,000 before any inter-department cost allocations Support work supplied by 25% 40% 35% 100% AS (budgeted head count) Support work supplied by 10% IS (budgeted time) computer 30% 60% 100% Required: 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.
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