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Phoenix Partners provides management consulting services to government and corporate clients. Phoenix 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, Phoenix's cost records indicate the following: (Click the icon to view the cost records.) Read the requirements. AS= 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. IS= + 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 ) Data table Budgeted overhead costs before any interdepartment cost allocations Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted computer time) Requirements 1. 2. AS SUPPORT 10% IS 4 25% OPERATING GOVT $ 600,000 $2,400,000 $8,756,000 $ 12,452,000 $ 24,208,000 Compare and explain differences in requirement 1 with those of the direct method and the step down method. Which method do you prefer? Why? 40% 30% Allocate the two support departments' costs to the two operating departments using the reciprocal method. Use (a) linear equation and (b) repeated iterations. - CORP X 35% Total 60% 100% 100% X Ph an de CO re Re Re Fi Direct method Direct Method Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments $ Support Departments AS Print IS 0 $ 600,000 $2,400,000 $8,756,000 $ 12,452,000 $ 24,208,000 (600,000) (2,400,000) Operating Departments GOVT CORP Done 320,000 800,000 4 280,000 1,600,000 Total 0 $ 9,876,000 $ 14,332,000 $ 24,208,000 - X e as hoenix Partners provides management consulting services to government nd epa S) Step-down method (AS first) orp eco Read Requ First AS 19 Step-down Method Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments $ $. Support Departments AS Print 0 The two support departments' costs have been allocated to the IS $ 600,000 $2,400,000 $ 8,756,000 $12,452,000 $ 24,208,000 (600,000) 150,000 240,000 210,000 2,550,000 (2,550,000) Operating Departments GOVT Done CORP Total 1,700,000 850,000 0 $ 9,846,000 $14,362,000 $ 24,208,000 O X enix Partners provides management qu st AS 19 Step-down method (IS first) Step-down Method Budgeted overhead costs before interdepartment cost allocations Allocation of IS costs Allocation of AS costs Total budgeted overhead of operating departments $ $ Support Departments AS 840,000 (840,000) Print 600,000 $ 2,400,000 $ 8,756,000 $12,452,000 $ 24,208,000 240,000 (2,400,000) 720,000 1,440,000 0 IS $ Operating Departments GOVT CORP Done 448,000 Total 392,000 $ 9,924,000 $ 14,284,000 $ 24,208,000 L X S d two operating departments-government consulting (GOVT) and e consulting (COP ndicate the follow k the icon to view = requirements. ment 1a. Allocate ermine the linear Reference Direct method Step-down (AS first) Step-down (IS first) Print GOVT method (IS department first). The results of the allocations followe 4 1,120,000 $ 1,090,000 1,168,000 Done CORP 1,880,000 1,910,000 1,832,000 - X ethod (AS first ethod (IS first) e three method 0.35 0.60 0.40 = 0.30 0.10 0.25 a ha er tm For COS $600,000 $2,400,000 $24,208,000 ition WO