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: