Question

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hudson Partners provides management consulting services to government and corporate clients. 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​,

Hudson's cost records indicate the​ following:

Requirement 1a. Allocate the two support​ departments' costs to the two operating departments using the direct method. ​(Do not round intermediary 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
Allocation of AS costs
Allocation of IS costs
Total budgeted overhead of operating departments

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.requirments

-Allocate the two support​ departments' costs to the two operating departments using the following​ methods:

Direct method

​Step-down method​ (Allocate AS​ first)

​Step-down method​ (Allocate IS​ first)

-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?

SUPPORT		OPERATING
	AS	IS	GOVT	CORP	Total
Budgeted overhead costs before any interdepartment cost allocations	$330,000	$2,100,000	$7,350,000	$12,425,000	$22,205,000
Support work supplied by AS (budgeted head count)	0	25%	45%	30%	100%
Support work supplied by IS (budgeted computer time)	10%	0	27%	63%	100%

Answer 1

Solution: