Manhattan Partners provides management consulting services to government and corporate clients. Manhattan has two support departmentsadministrative services(AS)
Question:
Manhattan Partners provides management consulting services to government and corporate clients. Manhattan has two support
departmentsadministrative services(AS) and information systems (IS)and two operating departmentsgovernment consulting(GOVT) and corporate consulting(CORP). For the first quarter of 2017, Manhattan's cost records indicate thefollowing
SUPPORT OPERATING AS IS GOVT CORP AS IS GOVT CORP TOTAL
Total Budgeted overhead costs before any interdepartment cost allocations $ 300,000 $ 2,100,000 $ 7,325,000 $ 12,425,000 $ 22,150,000 Support work supplied by AS (budgeted head count) 0 20% 48% 32% 100%
Support work supplied by IS (budgeted computer time) 10% 0 36% 54% 100%
Requirement 1a. Allocate the two supportdepartments' costs to the two operating departments using the direct method. (Do not round intermediary calculations and round 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 zerobalances.)
Support Departments
Operating Departments
Direct Method
AS
IS
GOVT
CORP
Total
Budgeted overhead costs
before interdepartment cost allocations
Total budgeted overhead of operating departments
Requirement 1b. Allocate the two supportdepartments' costs to the two operating departments using thestep-down method(Allocate ASfirst). (Do not round intermediary calculations and round 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 zerobalances.)
Support Departments
Operating Departments
Step-down Method
AS
IS
GOVT
CORP
Total
Budgeted overhead costs
before interdepartment cost allocations
Total budgeted overhead of operating departments
Requirement 1c. Allocate the two supportdepartments' costs to the two operating departments using thestep-down method(Allocate ISfirst). (Do not round intermediary calculations and round 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 zerobalances.)
Support Departments
Operating Departments
Step-down Method
AS
IS
GOVT
CORP
Total
Budgeted overhead costs
before interdepartment cost allocations
Total budgeted overhead of operating departments
Requirement 2. Compare and explain differences in thesupport-department costs allocated to each operating department.
Begin by entering the totalsupport-department costs allocated to each operating department under each of the methods below.
GOVT
CORP
Direct method
Step-down (AS first)
Step-down (IS first)
The direct method
completely recognizes services to other departments
ignores any services to other support departments
partially recognizes services to other departments
. Thestep-down method
completely recognizes services to other departments
ignores any services to other support departments
partially recognizes services to other departments
. There is a disproportionate usage of IS services by CORP.Therefore, when AS costs are allocated first it results in
an even allocation
the lowest overall allocation
the highest overall allocation
to CORP.Similarly, GOVT.'s usage of the AS group exceedsCORP's. Therefore, when AS costs are allocated second it results in
assigning an equal share of costs
assigning relatively fewer costs
assigning relatively more costs
to GOVT.
Requirement 3. What approaches might be used to decide the sequence in which to allocate support departments when using thestep-down method? (If a box is not used in thetable, leave the boxempty; do not select alabel.)
The approaches that could determine the sequence in thestep-down methodare:
Expert Answer:
