partial credit,E15-19 (similar to) Question Help ManhattanManhattan Partners pro
ID: 2412424 • Letter: P
Question
partial credit,E15-19 (similar to)
Question Help
ManhattanManhattan
Partners provides management consulting services to government and corporate clients.
ManhattanManhattan
has two support
departmentslong dash—administrative
services? (AS) and information systems
?(IS)long dash—and
two operating
departmentslong dash—government
consulting? (GOVT) and corporate consulting? (CORP). For the first quarter of
20132013?,
Manhattan'sManhattan's
cost records indicate the? following:
LOADING...
?(Click the icon to view the cost? records.)Read the requirements
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.
Requirement 1a. Allocate the two support? departments' costs to the two operating departments using the direct method. ?(Do not round interim 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 zero? balances.)
Support Departments
Operating Departments
Direct Method
AS
IS
GOVT
CORP
Total
Budgeted overhead costs
before interdepartment cost allocations
$330,000
$2,400,000
$7,325,000
$12,580,000
$22,635,000
Allocation of AS costs
(330,000)
214,500
115,500
Allocation of IS costs
(2,400,000)
960,000
1,440,000
Total budgeted overhead of operating departments
$0
$0
$8,499,500
$14,135,500
$22,635,000
Requirement 1b. Allocate the two support? departments' costs to the two operating departments using the? step-down method? (Allocate AS? first). ?(Do not round interim 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 zero? balances.)
Support Departments
Operating Departments
Step-down Method
AS
IS
GOVT
CORP
Total
Budgeted overhead costs
before interdepartment cost allocations
$330,000
$2,400,000
$7,325,000
$12,580,000
$22,635,000
Allocation of AS costs
(330,000)
66,000
171,600
92,400
$0
2,466,000
Allocation of IS costs
(2,466,000)
986,400
1,479,600
Total budgeted overhead of operating departments
$0
$8,483,000
$14,152,000
$22,635,000
Requirement 1c. Allocate the two support? departments' costs to the two operating departments using the? step-down method? (Allocate IS? first). ?(Do not round interim 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 zero? balances.)
Support Departments
Operating Departments
Step-down Method
AS
IS
GOVT
CORP
Total
Budgeted overhead costs
before interdepartment cost allocations
$330,000
$2,400,000
$7,325,000
$12,580,000
$22,635,000
Allocation of IS costs
240,000
(2,400,000)
864,000
1,296,000
$570,000
$0
Allocation of AS costs
(570,000)
370,500
199,500
Total budgeted overhead of operating departments
$0
$8,559,500
$14,075,500
$22,635,000
Requirement 2. Compare and explain differences in the? support-department costs allocated to each operating department.
Begin by entering the total? support-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)
Requirements 2-3
partial credit,E15-19 (similar to)
Question Help
Explanation / Answer
Answers
GOVT
CORP
Total Cost allocated
Direct method
AS
$ 2,14,500.00
$ 1,15,500.00
$ 3,30,000.00
IS
$ 9,60,000.00
$ 14,40,000.00
$ 24,00,000.00
Total
$ 11,74,500.00
$ 15,55,500.00
$ 27,30,000.00
Step-down (AS first)
AS
$ 1,71,600.00
$ 92,400.00
$ 2,64,000.00
IS
$ 9,86,400.00
$ 14,79,600.00
$ 24,66,000.00
Total
$ 11,58,000.00
$ 15,72,000.00
$ 27,30,000.00
Step-down (IS first)
IS
$ 8,64,000.00
$ 12,96,000.00
$ 21,60,000.00
AS
$ 3,70,500.00
$ 1,99,500.00
$ 5,70,000.00
Total
$ 12,34,500.00
$ 14,95,500.00
$ 27,30,000.00
GOVT
CORP
Direct method
$ 11,74,500.00
$ 15,55,500.00
Step-down (AS first)
$ 11,58,000.00
$ 15,72,000.00
Step-down (IS first)
$ 12,34,500.00
$ 14,95,500.00
Step Down approach is more appropriate when allocating Support Department costs. It is preferred over ‘direct method’. Under ‘Step Down’ approach also, the cost of that Support Department is to be allocated first, the cost of which is the highest. In this case “IS Department” has the maximum cost to be allocated and hence must be allocated first to all other department using Step Down approach.
Therefore, Step Down Approach with IS department getting allocated first (as in Requirement 1 ‘c’) followed by AS department.
GOVT
CORP
Total Cost allocated
Direct method
AS
$ 2,14,500.00
$ 1,15,500.00
$ 3,30,000.00
IS
$ 9,60,000.00
$ 14,40,000.00
$ 24,00,000.00
Total
$ 11,74,500.00
$ 15,55,500.00
$ 27,30,000.00
Step-down (AS first)
AS
$ 1,71,600.00
$ 92,400.00
$ 2,64,000.00
IS
$ 9,86,400.00
$ 14,79,600.00
$ 24,66,000.00
Total
$ 11,58,000.00
$ 15,72,000.00
$ 27,30,000.00
Step-down (IS first)
IS
$ 8,64,000.00
$ 12,96,000.00
$ 21,60,000.00
AS
$ 3,70,500.00
$ 1,99,500.00
$ 5,70,000.00
Total
$ 12,34,500.00
$ 14,95,500.00
$ 27,30,000.00
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