Seattle Partners provides management consulting services to government and corporate clients. Seattle 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 2017, Seattle's cost records indicate the following: (Click the icon to view the cost records.) The two support departments' costs have been allocated to the two operating departments using the direct method and the step-down method (AS department first) and the step-down method (IS department first). The results of the allocations are as follows: (Click the icon to view the direct method.) (Click the icon to view the step-down method (AS first).) (Click the icon to view the step-down method (IS first).) (Click the icon to view a summary of the three methods.) Read the requirements. Requirement 1a. Allocate the two support departments' costs to the two operating departments using the reciprocal method. First, determine the linear equations for each support department. AS- IS- Data table SUPPORT OPERATING AS IS GOVT CORP Total S 390,000 $ 3,600,000 $ 8,700,000 $ 12,470,000 $ 25,160,000 Budgeted overhead costs before any interdepartment cost allocatio Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted computer time) 0 20% 48% 32% 100% 10% 0 36% 54% 100% Print Done Direct method Support Departments Operating Departments Direct Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs $ 390,000 $ 3,600,000 $ 8,700,000 $ 12,470,000 $ 25,160,000 (390,000) 234,000 156,000 (3,600,000) 1,440,000 2,160,000 0 $ 0 $ 10,374,000 $ 14,786,000 $ 25,160,000 Allocation of IS costs $ Total budgeted overhead of operating departments Step-down method (AS first) Support Departments Operating Departments Step-down Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations $ 390,000 $ 3,600,000 $ 8,700,000 $ 12,470,000 $ 25,160,000 (390,000) 78,000 187,200 124,800 Allocation of AS costs $ 0 Allocation of IS costs 3,678,000 (3,678,000) 1,471,200 2,206,800 0 $ 10,358,400 $ 14,801,600 $ 25,160,000 $ Total budgeted overhead of operating departments - Step-down method (IS first) Support Departments Operating Departments AS IS GOVT CORP Total Step-down Method Budgeted overhead costs before interdepartment cost allocations $ 390,000 $ 360,000 Allocation of IS costs 3,600,000 $ 8,700,000 $ 12,470,000 $ 25,160,000 (3,600,000) 1,296,000 1,944,000 0 $ $ 750,000 (750,000) Allocation of AS costs 450,000 300,000 Total budgeted overhead of - X Reference GOVT CORP Direct method $ 1,674,000 $ 2,316,000 1,658,400 2,331,600 Step-down (AS first) Step-down (IS first) 1,746,000 2,244,000
