Chapter 15

SASS Inc. provides software consulting services to wholesale and retail clients. SASS has two support departmentsadministrative services (AS) and information systems (IS)and two operating departmentswholesale software (WHOLESALE) and retail software (RETAIL). For the first quarter of 2017, SASSs cost records indicate the following:

	SUPPORT		OPERATING
	AS	IS	WHOLESALE	RETAIL	TOTAL
Budgeted overhead costs before any inter-department cost allocations	$600,000	$2,400,000	$8,756,000	$12,452,000	$24,208,000
Support work supplied by AS (budgeted head count)	0%	25%	40%	35%	100%
Support work supplied by IS (budgeted computer time)	10%	0%	30%	60%	100%

Required:

a. Allocate the two support departments costs to the two operating departments using the following methods:

i/ Direct method

ii/ Step-down method (allocate IS first)

iii/ Step-down method (allocate AS first)