Reference no: EM131666282

Question: Support-department cost allocation; direct and step-down methods. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix 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, Phoenix's cost records indicate the following:

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?