Question
United Partners provides management consulting services to government and corporate clients. United has two support departments Administrative Services (AS) and Information Systems (IS) and two
United Partners provides management consulting services to government and corporate clients. United has two support departments Administrative Services (AS) and Information Systems (IS) and two operating departments Government Consulting (GC) and Corporate Consulting (CC). For the first quarter of 2013 Uniteds records indicate the following:
SUPPORT OPERATING
| AS | IS | GC | CC |
Budgeted overhead costs before any interdepartmental cost allocations | $600,000 | $2,400,000 | $8,756,000 | $12,452,000 |
Support work supplied by AS (budgeted head count) | - | 25% | 40% | 35% |
Support work supplied by IS (budgeted computer time) | 10% | - | 30% | 60% |
- Required:
- Allocate the two support department costs to the two operating departments using the following methods:
a. Direct method
b. Step-down method (allocate AS first)
2. Compare and explain differences in the support department costs allocated to each operating department.
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