Support-department cost allocation; direct and step-down methods. Phoenix Partners pro- vides management consulting services to government and corporate clients. Phoenix 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 2012, Phoenixs cost records indicate the following:

	A	B	C	D	E	F	G
1		SUPPORT			OPERATING
2		AS	IS		GOVT	CORP	Total
3	Budgeted overhead costs before any
4	interdepartment cost allocations	$690,000	$1,800,000		$8,650,000	$12,450,000	$23,590,000
5	Support work supplied by AS (budgeted head count)		25%		45%	30%	100%
6	Support work supplied by IS (budgeted computer time)	10%			27%	63%	100%

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

a. Direct method

b. Step-down method (allocate AS first)

c. Step-down method (allocate IS first)

2. Compare and explain differences in the support-department costs allocated to each operating department.

3. What approaches might be used to decide the sequence in which to allocate support departments

when using the step-down method?