Boston Partners provides management consulting services to government and corporate clients. Boston has two support Departments...

Boston Partners provides management consulting services to government and corporate clients.

Boston 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,

Boston's cost records indicate the following:

SUPPORT		OPERATING
	AS	IS	GOVT	CORP	Total
Budgeted overhead costs before any interdepartment cost allocations	$630,000	$3,000,000	$8,725,000	$12,470,000	$24,825,000
Support work supplied by AS (budgeted head count)	0	20%	48%	32%	100%
Support work supplied by IS (budgeted computer time)	10%	0	36%	54%	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?

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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