=+13-19 KK Support-department cost allocation; direct and step-down methods OBJECTIVE 3 Blueprint Ltd provides management consulting services to government and corporate clients. Blueprint Ltd 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 2014, Blueprint’s cost records indicate the following:

1 2

3 4

5 6

A B EDC F G AS IS GOVT CORP Total Budgeted overhead costs before any interdepartment cost allocations $600 000 $2 400 000 $8 756 000 $12 452 000 $24 208 000 Support work supplied by AS

(budgeted head count) 25%

Support work supplied by IS

(budgeted computer time) 10% 30%

Support 40% 35%

60%

100%

100%

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—

Operating 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).