Manhattan Partners provides management consulting services to government and cor

Question

Manhattan Partners provides management consulting services to government and corporate clients. Manhattan 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 2013, Manhattan's cost records indicate the following: E (Click the icon to view the cost records.) Read the requirements 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 "O for any zero balances.) Support Departments Operating Departments CORP TotalRequirements Direct Method AS IS GOVT Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments 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) Compare and explain differences in the support-department costs allocated to each operating department. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? 2. 3.

Explanation / Answer

Support Departments Operating Departments Direct Method AS IS GOVT CORP Total Budgeted overhead costs before interdepartmental cost allocations 660000 2400000 7325000 12550000 22935000 Allocation of AS costs -660000 396000 264000 Allocation of IS costs -2400000 720000 1680000 Total budgeted overhead of operating departments 0 0 8441000 14494000 22935000

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