Houstin Partners provides management consulting services to government and corporate clients. Houstin 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 2020, Houstin's cost records indicate the following: (Click the icon to view the cost records.) Read the requirements.

Requirements

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

1. Direct method
2. Step-down method (Allocate AS first)
3. Step-down method (Allocate IS first)
4. Compare and explain differences in the support-department costs allocated to each operating department.
5. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method?

\begin{tabular}{|c|c|c|c|c|c|c|c|} \hline & A & & B & C & D & E & F \\ \hline 1 & & \multicolumn{3}{|c|}{ SUPPORT } & \multicolumn{2}{|c|}{ OPERATING } & \\ \hline 2 & & & AS & IS & GOVT & CORP & Total \\ \hline 3 & \begin{tabular}{l} Budgeted overhead costs before any \\ interdepartment cost allocations \end{tabular} & $ & 390,000 & $1,500,000 & $8,650,000 & $12,425,000 & \$ 22,965,000 \\ \hline 4 & \begin{tabular}{l} Support work supplied by AS \\ (budgeted head count) \end{tabular} & & 0 & 25% & 45% & 30% & 100% \\ \hline 5 & \begin{tabular}{l} Support work supplied by IS \\ (budgeted computer time) \end{tabular} & & 10% & 0 & 27% & 63% & 100% \\ \hline \end{tabular}